Gold and Precious Metal Prices Affected by Federal Reserve Interest Rates
Posted on | December 16, 2009 | 2 Comments
The price of gold and precious metals have been an extremely popular topic in financial news and on financial blogs. The authors at Healthy Financial Habits point out how the price of gold and precious metals is affected by Federal Reserve interest rates as stated here:
“One of the biggest factors affecting the price of gold is interest rates. Currently interest rates have been hovering near 0% for some time now. If the federal reserve gives a signal as to when they plan to when the raise the interest rate we will see a huge sell off of gold and the value to drop off as well. The reasoning behind this is that if interest rate were to raise the value of dollar would also go up and as we all know when the dollar moves up, gold move down.”
Today we are going to get the commentary from the Federal Reserve Bank meeting. At the current time we are seeing the price of gold up around $14 an ounce. After the Federal Reserve Bank commentary there is little doubt that we will see a significant move in the price of gold one way or the other. Let’s wait and see what happens; news should be out momentarily.
Author: Jeremy North
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2 Responses to “Gold and Precious Metal Prices Affected by Federal Reserve Interest Rates”
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December 16th, 2009 @ 2:16 pm
Thanks for the mention in your article!
December 17th, 2009 @ 11:09 am
The free lunch can only last for so long, ultimately we’ll have to pay the piper for the reckless decisions of our government. And I think that until the govt addresses the basic structural problems in our financial system of too much debt, we will not have a sustainable recovery. So while the stock market can stay irrational in the shorter term, in the long run I believe it will go back to reflecting the fundamentals of our boom and bust economy. And that’s why I continue to feel that for long term investors a better portfolio allocation is in cash and gold. I think the gold price will continue to rise due to a lack of faith in central banks’ policies and in fiat currencies. I recently read a good article on this topic called Gold Price Wobbles Under $1,130 But U.S. Dollar Future Bleak, which discusses the relationship between the dollar, the gold price, and gold mining companies as a result of the Federal Reserve’s monetary policies. I thought it was especially helpful for investors to read to get a better sense of the relationship between these asset classes given all the uncertainty in the economy.