How Did the Fed's Rate Hike Impact Precious Metals?

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Part 2
How Did the Fed's Rate Hike Impact Precious Metals? PART 2 OF 5

Upcoming Rate Hikes Could Impact Gold

Upcoming hikes

Concerns about the Dutch election could give more air to precious metals due to safe-haven bids. The sentiment in the precious metals market is optimistic amid rising interest rates and uncertainty fueled by Trump’s Administration. Other global phenomena, like the election, keep fueling precious metals.

Since the rate hike was expected, investors were focused on the Fed’s message after the meeting. The statement is crucial because it could help determine the Fed’s upcoming moves. The Fed lifted the key short-term interest rate by a quarter-point to 0.75%–1% on March 15. It maintained its forecast for two more rate hikes in 2017.

Upcoming Rate Hikes Could Impact Gold

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Miners followed metals

One of the most crucial elements playing on precious metals is overall market volatility. Even amid the rising interest rate, if market volatility rises, investors can expect gold to increase. The above chart shows the Volatility Index (VIXY) (VXZ) compared to gold (GLD) (SGOL).

Volatility and gold can be expected to walk hand-in-hand during turbulent times. Investors turn to safe-haven assets like gold when there’s unrest in the market.

Mining shares exhibit a mix of equity and precious metal traits. Most of the time, miners like Barrick Gold (ABX), Royal Gold (RGLD), B2Gold (BTG), and First Majestic Silver (AG) followed precious metals and also witnessed a revival in their price after the hike took place.


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