Last Five Rate Hikes, Five Gold Rallies; Next Rake Hike This Wednesday

Scrap Register  ( Original )
MAR 15, 2018

We’ve seen five rate hikes so far in this nascent Fed tightening cycle, and the gold price is batting 5-for-5 in the face of each action. The Fed meets this coming Wednesday, March 21, and there is near-universal agreement we will see the sixth quarter-point rate raise in a row.

If history is any guide, next week could signal a significant buying opportunity for gold investors as long as prices hold critical support above $1,285 an ounce, according to one analyst.

“The five rate hikes seen so far in this current cycle all resulted in the same behavior with gold selling off ahead only to rally strongly once the announcement was made,” Ole Hansen, head of commodity strategy at Saxo Bank in a note Tuesday. “The last couple of weeks ahead US rate hikes have proven in the past to be a good buying opportunity.”

While the Federal Reserve is widely expected to raise interest rates next week by 25-basis points, Hansen said that the key for the gold market will be the central bank’s forward guidance.

In its previous economic projections, the central bank indicated that it projected three interest rate three hikes this year. However, in the last few weeks, expectations have increased for more forceful action. Hansen noted that markets are pricing in a 26% chance of four rate hikes this year.

ORIGINAL SOURCE: Last five rate hikes has been a buying opportunity for Gold Investors at Scrap Register on 3/15/18