Gold Silver Reports — Gold Prices goes Against the Grain — What works for gold in practice rarely works in theory. The last three US interest rate increases that should, all other things being equal, be bad for the metal have seen prices jump in the months that followed.
Gold is up about 7% since the Federal Reserve raised rates on 14 December. It jumped 13% in the two months following the last increase in December 2015 and 6% the previous time way back in June 2006. Partly, it’s rational expectations, and other things getting in the way. This time one of those things is Donald Trump’s presidency. Uncertainties surrounding his administration have dominated markets since the 8 November election.
Precious metals initially plunged as investors noted Trump’s vow to supercharge the economy with infrastructure spending. That would raise returns on assets such as shares and curb interest in havens like gold. Yet, with Trump’s time in office so far focused on other matters, the trend was quickly halted and reversed. The Fed’s rate increase in December once again became a low-water mark for gold, and expectations for further increases by the bank have failed to halt further price gains. — Neal Bhai Reports