Surprise, Surprise: Gold Moves Higher
By: Jeffrey Nichols
Surprise, surprise! Despite last week’s move by the U.S. Federal Reserve, America’s central bank, to tighten monetary policy a notch, gold prices surprised many observers of and participants in the gold scene, even those who had expected the quarter-point increase in short-term interest rates would be sufficient to knock the metal into a still-lower trading range under $1,200 an ounce.
After all, higher interest rates are widely perceived as a negative or bearish influence on the gold price. But, as noted below, it is really the notional real “inflation-adjusted” rate of interest, not the “nominal” rate as might be quoted by a bank or other lender.
Not only did the Fed dial up short-term rates by a quarter percentage point, it suggested further tightening later this year and next, depending on economic performance and inflationary tendencies later this year. Yet, contrary to popular expectat…