The Federal Reserve may be eying its next rate hike as soon as this summer. Evidence of a possible June rate hike came Wednesday when minutes from the Fed’s April meeting gave a more upbeat assessment of the U.S. economy. “Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter…then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June,” according to the minutes. – CNN
In this article, we will discuss why gold, and silver, too, are “golden” no matter where rates end up in June.
Let’s examine the surrounding circumstances.
You see, there are three choices. Either the Fed raises rates, keeps them where they are or lowers them.
Let Fed officials hint that they are changing the status quo and the mainstream media begins to churn out millions of words on the potential shift.
The whole idea is for the Fed to be the center of attention. This supposedly justifies the current economic system. In fact, the current system is a disaster.
A small group of people cannot decide on the volume and price of “money” with any accuracy.
The result is a constant, cyclical wave of booms and busts. The booms grow larger as do the busts. Finally a bust comes along like the one in 2008, and the world economy cannot recover from it.
The world is consumed by depression. And central bank propaganda expands.
In order to save us, they will print MORE money.
They are understand the impression that excess money can create economic growth. They do not understand Austrian, free market economics.
Only human beings and human actions can create growth and prosperity.
The Keynesian model is a lie.
But Fed officials do not acknowledge this. They maintain money printing, which they control, is the key to prosperity.
And now they have decided that the money printing that has taken place since 2008 has moved the economy forward.
There is no real evidence this is so. Something like 100 million US citizens are not formally participating in the work force. The US survives on its gray and black market economy.
So how does the Fed “know” the economy is strengthening. It doesn’t.
Fed officials feel impelled to say the economy is growing because they are worried about all the money they have printed.
That money is contributing to what we call stagflation. That’s when price inflation rises while the economy remains moribund.
But the Fed has to do something to mop up that money. Even something as insignificant as a small hike.
The last hike was a disaster for the stock market. This one will be too, if it happens.
Meanwhile, just as in the 1970, gold flourishes regardless of rate hikes. This is why George Soros and other billionaires have started to buy gold.
In the 1970s, Paul Volcker had to hike rates to nearly 20 percent to get price inflation under control.
Price inflation was driving the purchase of gold and other assets. And today, again, price inflation will drive the price of gold against the dollar.
If rates are not raised, gold will move up on a perception of increased price inflation.
If rates are raised, gold will move up because the stock market will move down.
In the 1970s, gold moved regardless of central bank money manipulation. Now, as then, gold is moving. Not just physical gold. After some 30 years the miners are starting to move too.
This is good news for people without a lot of money. If gold and gold miners really start to move, people can buy positions in miners for pennies on the dollar and, in some cases, enjoy hefty returns.
It almost doesn’t matter what company you choose if miners drive higher. The whole sector tends to travel.
But if you want to buy a miner, buy one that seems to have a good internal marketing program. For miners, it’s often not the properties that count in a bull market but who shouts the loudest.
We’ve consistently argued in these pages that rate hikes, especially substantial ones, are not going to happen. We’d be surprised if the Fed raises rates in June.
But even it happens, it probably won’t affect the direction of gold and gold stocks.
They’re going higher if rates go up. Or if they remain the same.
The stock market is tapped out. There’s too much currency sloshing around in the world today.
And economies are still in the doldrums. The trend is toward easy money not tightening.
Watch gold and gold stocks move. And silver too. Silver may have farther to travel than gold.
Conclusion: Such times as these when central banks lose control over their money manipulations do not come often. But they have arrived. Involve yourself as you wish. You may strike gold.
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