Can Gold and Rates Rise Together?

Last week, the release of minutes from the latest Federal Open Market Committee (FOMC) meeting showed there is growing support for another rate hike to take place in June.

This seems to be quite contrary to recent assessments by many analysts, who have cited several reasons that any further hikes would likely wouldn’t be seen until December, if at all in 2016.

Perhaps this was another example of investor complacency. According to the minutes: “Some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting, and they emphasized the importance of communicating clearly over the intermeeting period.”

A shot across the bow perhaps?

It sounds like the Fed is trying to prepare markets for a June hike…

While there may be further evidence of economic improvement, there are also downside risks remaining; therefore, a June hike is not a certainty.

Following the release of the minutes, stocks sold off, gold and silver declined, and the dollar rallied.

Such a knee­jerk reaction is not unexpected. For now, however, it begs the question: If a June rate hike is a real possibility and the dollar rallies, what might be a primary catalyst for further upside in gold?

We believe a strong stock market sell­off could be a strong driver for higher gold even in spite of rising rates.

May 18th was a great example. After showing strength all day, stocks immediately began selling off after the release of the FOMC minutes.

Stocks have swelled to all-time highs in an era of zero interest rates and on the back of massive amounts of stimulus.

What happens to stocks as rates rise and there is no more free money? Could equities head lower? A lot lower?

We think so…Looking at bear markets since World War II, a rise in interest rates has often preceded lower stocks.

Will this time be different? Probably not…

We see a great asset rotation potentially upon us. As the notion of higher rates sinks in further, equity investors may look to dump stocks in grand fashion.

As the great bull market comes to an end, investors will begin to be more aggressive in looking for alternative asset classes in which to put capital to work.

In our view, much of that capital could find its way into gold, silver and other precious metals.

While some might argue that rising rates are bearish for gold, we feel just the opposite is true.

In fact, we feel there are now more reasons to own gold than ever before.

Whether or not the Fed hikes in June really doesn’t matter. We feel the stock market bubble is on the verge of collapse.

Furthermore, if the Fed does hike and there is a return to massive selling and volatility, the central bank could simply revert to low or zero interest rates­ or even start up the printing presses again with even more stimulus.

Kind of like a hamster wheel…

Now may be the time to consider some alternative asset classes that could potentially rise in value during an equity bear market. The kind of assets that have stood the test of time and are appreciated all over the world.

Now may be the time to consider an allocation in physical gold or other precious metals.

The era of free money is over for now. Why not add assets that could potentially appreciate in value and protect your wealth if stocks collapse?

On the flip side, these metals could also potentially appreciate significantly if central banks are forced to return to zero interest rates and/or reintroduce additional stimulus measures.

In our view, it’s a win/win.

Speak with an Advantage Gold account executive today about your options. Physical gold, silver and other precious metals can be bought and held within your IRA account, making it very convenient to begin building a significant holding of these key precious metals. Don’t wait for the stock bubble to burst, as it has time and time again. Act now. Call us today at 1­-800­-341­-8584 to get started.