Before you jump the gun and think it’s the end of the world for precious metals, let’s look at a few things. The Fed has continually threatened to raise rates since 2008 but has only managed to raise rates twice since then. This is paramount to understanding that the bust economy may not be over and a stock market crash might be on the horizon. Why? Because the last time the Fed raised rates before this week was in 2015 on Dec 16th.
Every year at Christmas time precious metals fall and the dollar tends to go up because economic indicators improve. That’s right, the temporary seasonal hiring and buying and selling for Christmas is treated as if it’s an economic recovery. Believe it or not, this happens every year, AND NO ONE SEEMS TO REMEMBER!
Suddenly around mid-January, we realize all that data was seasonal and possibly wrong. Metals then start to move up again with the fed threating to raise rates all year long (at least this was the pattern last year). The public has a short memory, and I think what happened in 2015 when silver closed lower than it is today will repeat itself in 2016 resulting in a big bounce in 2017. One big difference…? The stock market has rallied like never before. What goes up, must come down. With that downward correction, we could see a panic into gold and witness an unprecedented surge
Look at this week’s interest rate increase as smoke and mirrors. The Fed is riding on the wave of fourth quarter seasonal economic growth, not real economic change.
The top chart above shows the drop from the Dec 16th, 2015 rate hike (See 17-Dec). The second chart above shows the current prices after the most recent hike.
The January 2016 chart shows us the rate hike of Dec 2015 had little impact and gold continued its seasonal upward trend with silver following. Do not listen to me. I sell gold. Check out the charts for yourself and draw your own conclusion.
By Mark Hutto