Market Report

Strong reaction: Gold jumps on despite US rate hike

They did it again: The US Federal Reserve has taken the third rate hike since the historical zero-interest phase. Other forecasts on future monetary steps were not heard by the monetary authorities, however, the markets assume three rate hikes this year.

The precious metals trader “Emporium” considered in its “Market & Trends” newsletter the economic situation of the United States – there a real boom can be observed,  the country has practically full employment and inflation has approached the target values ​​of the Fed. So there was no good reason to keep interest rates remain low. However, the reaction of the gold price was surprising: In consequence of the Fed’s decision it rose by two percent. Risky assets such as shares or interest-free asset classes such as gold therefore seem to be no less interesting despite rising interest rates.

However, there are actually some good reasons for the strong reaction of the gold price: The citizens in the US have more money in their wallets, so they can buy more. More consumption stimulates inflation, prices are rising – and gold protects against price increases. Whoever therefore wants to protect his assets, would actually have to spend immediately – or invest in gold and silver.

Despite the euphoria, however, “Emporium” urges caution: In the US, stock prices are at record highs, but the stock gains and corporate profits have long been disconnected from each other. And if the new US president Donald Trump actually weakens the dollar as planned to make US products more attractive for the world market, the euphoria in the United States may come to an abrupt end.

The gold price has now stabilized above 1,200 dollars per fine ounce and would soon jump over the 1,250 dollar mark to aimt at the next medium-term target of 1,300 dollars per fine ounce.

About the author

Sebastian Wieschowski