After a two-day meeting of the Open Market Committee of the Federal Reserve wrapped up recently, Fed Chairman Jerome Powell made it clear the Federal Reserve would not be raising interest rates any time soon. He said instead the agency would monitor the economy’s direction before making any changes. The news and the policymakers change in tone was greeted with great excitement by investors on Wall Street. By the end of the day the Dow Jones Industrial Average had surged and closed up by over 400 points. The Federal Reserve’s decision not to raise rates was also great news for gold traders.
Gold Traders Bullish On Latest Fed Rate Policy
A Unique Relationship
Investment experts say there is a unique relationship between interest rates of the Federal Reserve and investment in gold. Many say over the years when the Fed’s interest rates are high or rising, investments in and the value of gold tends to decline. So with the Fed’s Open Market Committee preaching restraint when it comes to increasing interest rates, many market watchers and investors were anticipating a surge in the interest in and value of gold. And they were not disappointed. Since the Fed released its statement, gold futures has had an impressive 4-day win streak.
A Good Sign For Gold Investors
The 4 days of consistent growth enjoyed by gold futures is the longest one it has had since late in December of 2018. Plus, at the close of trading on Wednesday, gold futures had the highest finish they had attained since the middle of May last year. And in electronic trading, prices have only continued to go up after the Federal Reserve decided the interest rates should be left unchanged. By promising to be ‘patient’ with regards to hiking up interest rates, the Fed has boosted the confidence of people who wanted to invest in gold, but were leery of the Federal Reserve raising interest rates and diminishing the interest in gold.
A Seeming Green Light
The recent announcement of no plan to raise the interest rates any time soon, gives gold investors an opportunity to send gold prices soaring over the next few months. The price of gold had seemingly plateaued at between $1,355 and $1,375. Some investment experts say it could bypass that plateau and move higher as people rethink their positions, seize the opportunity and start buying gold. The ascending triangle technical analysis pattern on the price of gold could well move beyond the resistance level and establish new highs. This could draw in new buyers and take the price of gold upwards.
The Smart Play
Savvy investors and those looking for leveraged returns, are monitoring gold mining stocks before making their move. Gold mine stocks usually significantly outperform gold bullion. Rising gold mining stock prices could signal a bull run on gold prices that is much better than in recent bull markets. Many industry analysts say they wouldn’t be surprised. There are already signs of bullish momentum. The moving average convergence/divergence indicates buyers are present and purchasing. Smart money is simply waiting for the right moment to strike and gold prices could go much higher.
A Positive Outlook
With the Fed rate steady and countless gold traders poised to take the plunge into the fray to take advantage of looming opportunities, the outlook for investing in gold is positive. Many experts say the Federal Reserve’s statement is setting up gold prices to soar. They say the coming months could see surging gold prices. Many see this as a very strong indicator that now is a great time to own some gold. For years, the Federal Reserve was adamant about continuing to raise interest rates. That put a lot of pressure on potential investors in gold. The pressure is gone and the price of gold may soon soar.
Federal Reserve Cites ‘Muted Inflation Pressures’
After years of rhetoric about raising interest rates that made skittish investors back away from gold, the Federal Reserve’s conservative Open Market Committee has changed its tune. They are now talking about patience and Federal interest rates that support economic and financial developments around the world. For gold traders now is the time to strike. The Federal Reserve doesn’t want its aggressive interest rate raising monetary policy to freeze economic growth. The Fed’s new position should make gold buyers very bullish, stimulate more interest in the precious metal and send the price of gold trending upward.
It’s Very Big News
While the Fed’s new position on interest rates won’t stay in place forever and there’s even talk about rate cuts, its very big news that gold is back without rising interest rates to impede the growth of its value. After investors’ heavy scrutiny of gold mining stocks and market interest, the precious metal seems poised to hit a new breakout level price that could be as high as $1,675 or more. Technical analysis supports that level of growth in value. The April gold contract that’s the most active added 30 cents a share the day the Fed made its announcements. One February delivery contract rose $1.
Just The Beginning
One week after the statement by the Federal Reserve on the interest rate freeze, Dow Jones Market Data shows the value of gold futures steadily moving upwards. Once the average investor wraps their mind and their money around this opportunity, experts postulate, the weaker dollar can actually bolster bullion buying. Monitoring Fed Chairman Powell’s comments for hints on how fast the central bank will unwind its asset portfolio and increase its interest rate will influence the trade in gold and other precious metals. But gold traders in the know understand owning gold is a good idea right now.
Reassuring Wall Street And Main Street
Experts interpret the Fed’s statement about halting its rate-hike campaign as an acknowledgement it got the message the average American and Wall Street stock market investors are sending. This new Fed position will help to fend off an economic downturn and protect the country’s hard earned ‘wealth effect’. Investors can now confidently put some of their money into gold and ride the wave as gold prices move upwards unencumbered by the specter of Fed rate increases. For many gold traders this is a great time to reach out to a wider market with their products poised to potentially rapidly increase in value.
Gold Traders Reacting Positively
Many investors had seen the regular interest rate increase by the Federal Reserve as being too aggressive. Since the Fed has stated its new policy, gold is reacting positively. There is something of a gold rally with a foundation buttressed by the understanding a moderated pace of rate increases helps yields that support a bullish market for gold. Following the Fed’s announcement, gold futures have edged up and there has been increased optimism by consumers. With the federal funds rate at between 2.25% and 2.50% and a promise of no impending rate hikes, gold is inching upward.
What Inspired The Fed’s Policy Change
While industry analysts are excited about the Fed’s new policy of watching global economic indicators closely and waiting before taking action on interest rates, many wonder what motivated them to change. Speculation includes that many major corporation’s disappointing fourth-quarter earnings reports, along with lower-than-expected first quarter guidance may have played a role. After a rapid pace of growth early in 2018, U.S. companies seemed to be experiencing a slowdown. Freezing the federal interest rates keeps consumer’s credit card interest down and could encourage spending and economic growth.
Fed Rate Impacts Credit
The Federal Reserve’s interest rate hikes not only makes interest rates on credit cards go up, it also impacts auto loans, home equity line of credit and more. This interest rate freeze can embolden consumers to spend and invest more and the gold market is one of the potential beneficiaries. No rate hikes in early 2019 is good news for consumers and businesses alike. The OMC statement described U.S. economic growth as ‘solid’, not ‘strong’ as it was characterized a short time ago. And with inflation not an immediate threat, the Fed’s action may be designed to prevent economic malaise.
Negotiating Economic Headwinds
The decision by the Fed to keep interest rates unchanged for the short term came at the perfect time. While, according to the Fed statement, the U.S. economy is ‘solid’, many investors are concerned that global economic growth is slowing. With a steady federal interest rate for the foreseeable future, one way people traditionally negotiate uncertain economic times is to invest in precious metals. That makes gold very attractive to a growing number of people looking for a safe investment that will hold its value over time. This means that gold traders could enjoy a major boon.
A Stable Investment Vehicle
For hundreds of years people have seen investing in gold as a safe way to protect their wealth. With the Fed acknowledging that economic growth has ‘weakened somewhat’ making aggressive rate hikes to prevent inflation not necessary immediately, some investors may panic and put their money in the most stable investment vehicle possible. For many people that’s gold. Gold is the ultimate universal currency. It’s valued highly and desired by people of almost every culture. Plus, as the price of gold could potentially rise significantly soon, it can become a very attractive investment option.
Building Consumer Confidence
Several economic factors have left consumer confidence shaken. Increasing talk of a trade war with China, weakening economic growth abroad and the partial government shutdown which has created financial and business uncertainty, have consumers and investors somewhat spooked. The dovish statement by Fed Chairman Jerome Powell and the Open Market Committee has the potential to assuage consumer and investor fears and give them the courage to spend with confidence. Market analysts say gold traders may see increased business as more people begin investing in gold as a hedge against uncertainty and a great way to make money before interest rates rise again.
