Gold – Watching the Fed
By: Jeffrey Nichols, Senior Economic Advisor
The U.S. economy has rebounded from its winter slump – but recent data continue to present mixed signals, leaving the Federal Reserve and most Fed-watchers alike uncertain about the timing of the much-anticipated first step-up in the Fed funds interest rate.
One thing is for certain: the gold market and other financial markets already expect the coming hike in interest rates later this year – and anything else could prove to be a plus for gold.
Regardless of the timing – September, December, or sometime next year – we do know for sure, barring a setback in economic growth, the Fed will sooner or later begin “watering down the monetary-policy punchbowl” by retreating from its near-zero interest rate policy that has ruled financial markets – including gold – for the past few years.
Reading between the lines, it strikes me that the Fed’s real concern is the po...