- January 08, 2016 -
As many of you are well aware the Federal Reserve did as many expected on December 16, 2015, raising its key rate by .25% and announcing it will slowly raise rates over the next few years. Here at Jack Hunt’s we observed a noteworthy uptick in bullion sales in the days immediately following this announcement. With that in mind I’ll offer a few thoughts on the implications of this and future rate hikes and the rationale behind the Feds decision. Although I won’t predict what these higher rates mean for the short or long term price of Gold, I hope you’ll conclude after reading this that precious metals deserve a more prominent place in your portfolio.
There were several premises for the recent rate hike:
1) The Fed knows what interest rate is good for the economy.
2) That the recovery is sufficiently established to permit an end to the ‘emergency’ micro rates of the last several years.
3) Everything more or less is hunky-dory so to speak.
I personally disagree. Active buyers and sellers should set the price of credit, not the Fed. And if you think the recovery is firmly established and all is well, please consider a few facts:
Virtually everyone not paying income taxes, regardless of age, is dependent on family, pensions or the government for survival. If the economy is so great, as the Feds current and future outlook on interest rates suggests, why are 30% of the able bodied workers in this country jobless? To my way of thinking lower paying jobs and higher true unemployment levels don’t bode well for a country already drowning in debt. A new recession and a downturn in the stock markets seems inevitable in the not too distant future. As a result, many are turning some of their paper assets into tangible assets like gold and silver while the equity markets are still comparatively strong.