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« The Precious Metals Sector To Shine As The Fed Blinks | Main | Central Bankers, The U.S. Dollar and The Inverse Relationship with Gold »

The Feds Rate Hike Weakens Gold and Boosts the Dollar


At the FOMC meeting today the Federal Reserve raised rates more or less as expected. The result was a boost for the US Dollar and a fall in precious metals prices. Once again, we have a clear demonstration that the inverse relationship between the US dollar and gold is alive and well.

The second takeaway that we have is the rhetoric regarding the Feds future plans on monetary policy. As we see it the Feds stance has softened as the number of rate hikes planned for 2019 was standing at three and this has been reduced to two.

Reading the text from the FOMC meeting the rate hike can be summed up as follows:

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent.

If we assume that the aggressive tightening of monetary policy is now entering into a more passive phase, then the dollar’s rally, in the long term, has probably come to an end. This being the case a weakening dollar will be supportive of gold prices and thus herald in a brighter future for the precious metals sector.

As gold bugs we must recognise that the worlds central bankers play important role in determining the future of the markets, currencies and the commodities sector.

It should also be noted that the Federal Reserve has changed direction albeit gently. This change we see as good for gold and our expectations of a new era for the whole of the Precious Metals sector is lot higher than it has been for the last few years.

Charts of the US Dollar, S&P500 and Gold

First up is the chart of the US Dollar which depicts the difficulty it is having breaking through the resistance at the 97 level. We can also see that the Feds rate hike helped the dollar to recover a little today.

The chart of the S&P500 depicts its sudden fall from grace in recent months suggesting that this bull run in stocks is coming to an end.


 gold should do better now that the Feds have a more dovish stance.

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