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« Gold: Rock, Paper, Scissors | Main | Its Time To Rotate Out Of The S&P 500 And Into Precious Metals »
Wednesday
Jul312019

The Feds Rate Cut Sends The US Dollar Higher and Gold Lower

Preamble

Monetary policy has long been influential in gold's fortunes. In recent times, the Fed has used bond buying and reductions to interest rates as the economy faltered. This action serves the purpose of providing more and cheaper funds for the markets to function. We have been through a sustained period of monetary easing which has resulted in the S&P 500 climbing to record highs. The Fed then decided to "normalize" rates in that it wanted to raise rates to around 6% in order to provide the wriggle room needed to offset a downturn in economic activity. A series of rate hikes was then implemented, but the Fed failed to get anywhere near its stated aim.

The Federal Reserve Reduces Rates

This week, faced with a perceived faltering economy, the Fed implemented what many thought might be the first of many rate cuts by reducing the funds rate by 25 basis points, the first since 16th December 2008. The plan for future rate cuts remains as ambiguous as ever, so the markets fell, the US dollar rose, and gold, silver and their associated stocks fell initially.

The narrative accompanying the Fed's decision included "implications of global developments for the economic outlook as well as muted inflation pressures"

READ MORE.......

 gold dropped....and the bounched back to close the week at $1457.50/Oz, staying above this level is now critical and tells us that this Bull is serious.

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