X
<

Can Investors Expect a Rebound in Gold under Trump's Presidency?

PART:
1 2 3 4 5 6 7 8 9 10 11 12
Part 9
Can Investors Expect a Rebound in Gold under Trump's Presidency? PART 9 OF 12

A Fed Hike Is Coming: How Does It Bode for Gold?

Fed meeting

Gold investors are keenly eyeing the highly anticipated meeting of the Federal Open Market Committee (or FOMC) on December 13–14, 2016, and the committee’s probable hike in interest rates. 

Gold is highly sensitive to rising rates, which increase the cost of holding non-yielding assets such as gold and boost the US dollar, from which gold gets its price. Since gold pays no interest, rising returns from US bonds and other markets is seen as negative for the precious metal.

A Fed Hike Is Coming: How Does It Bode for Gold?

A Fed Hike Is Coming: How Does It Bode for Gold?

Receive e-mail alerts for new research on ASR:

Interested in ASR?
Don’t miss the next report.


Success!
You are now receiving e-mail alerts for new research. A temporary password for your new Market Realist account has been sent to your e-mail address.

Success!
has been added to your Ticker Alerts.

Success!
has been added to your Ticker Alerts. Subscriptions can be managed in your user profile.

Fed hike versus gold

While a rate hike would be seen as a negative for gold, investors should note that since the first rate hike of the current tightening cycle in December 2015, gold has risen more than 20%. The Fed’s upcoming potential rate hike has been anticipated by market participants for some time now. Most of the hike odds in December have already been priced in to gold.

Following Donald Trump’s presidential victory, the US dollar rallied, and expectations of a Fed rate hike also gained strength, leading to further falls in gold. Gold prices have fallen 9% since Trump’s win.

Impact on gold investments

Gold prices are expected to remain volatile (VIXY) (VXX) in the near term due to Trump’s inflationary policies, which could increase the possibility of a rate hike and a rise in the US dollar. 

A rising dollar and rising yields don’t seem to be playing out well for precious metals (GDX) (SLV). This weakness will likely also be apparent in miners such as Eldorado Gold (EGO), Kinross Gold (KGC), Alacer Gold (ASR), and Silver Wheaton (SLW).

X

Please select a profession that best describes you: