Persistent low rates have not caused inflation, but they have caused asset bubbles, which threaten to pop and unleash a financial panic on their own — independent of tight financial conditions.
It may not seem important, but where the gold price goes next could provide a major clue on the health (or otherwise) of the world’s economy.
Gold is volatile for one reason. Investors remain infatuated with the next US Federal Reserve interest rate decision. The Fed next meets in November. Investors don’t believe the Fed will do anything at that meeting.
The weak US economy and the weak US dollar policy resulting from the Shanghai Accord meant that the Fed was unable to raise interest rates.
In today’s video update Kris looks at rising US interest rates and the knock-on effect it’s having on stock markets…
Goodfriend’s focus was to promote ‘unencumbered’ negative interest rate policy, which means getting rid of things standing in your way.
The question is, with gold having now pulled back 3.78% from the July high, what’s next? Should you lock in your gains, or have a punt?
Knowing how the Federal Reserve is organised and who’s in charge can position you to preserve wealth and even profit from the coming Fed-induced turmoil.
It’s a Tom and Jerry market. Here’s how it works… The Fed thinks the economy is recovering and makes noises about raising rates at some time in the future.
Typically, central banks use monetary policy (interest rates) to stimulate or stymie demand. It’s all about finding the right balance of growth and inflation — not too hot, and not too cold. Or as the phrase goes: the ‘Goldilocks economy’.