From Peter Reagan
This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Is gold really underperforming?, more woes from COMEX and Austrian Mint discusses recent supply strains.
No Fed U-turn means gold will disappoint… right?
Last week’s gold news was, for the most part, how the Federal Reserve didn’t U-turn. It’s sticking to its hawkish monetary-tightening policy with general expectations that it will continue to do so. The subsequent headlines are surprising. For example, one notes that gold is on track for its worst week in a month due to the Fed’s continuing hawkishness.
Let me take a moment and explain why the Fed’s policies are so closely watched by investors, and what they have to do with gold’s price. There are two big factors at play.
First, remember, the Federal Reserve controls the global supply of dollars. When the Fed makes more dollars (we call this inflation), the price of intrinsically-valuable commodities like gold, crude oil etc. tends to go up in direct proportion to the increase in dollars. Inflation makes dollar purchasing power decline, so it takes more dollars to buy the same quantity of gold. That’s where gold gets its “hedge against inflation” reputation.
Continue reading “Fed Announcement Has Unexpected Effect on Gold Demand”
An employee works at Nadezhda Metallurgical Plant of Nornickel company, the world’s leading nickel and palladium producer, in the Arctic city of Norilsk, Russia. Image via REUTERS/Tatyana Makeyeva
