Don’t Fear a Rate Rise

It would be fair to say the world’s financial markets are fixated on when the US Fed will raise interest rates.  Every piece of economic data and every word that comes out of any from the Fed’s mouth is analysed for clues.  That’s why we report on these each week in our Weekly Wrap.  The majority of analysts (albeit the same ones who consistently expect data to be better than it ends up being) are calling for a rise in September.  Each time people expect a rise gold gets hit and usually so do shares, the latter because it is signalling a tightening in the loose monetary policy that has inflated markets beyond fundamentals, and gold because it strengthens the US dollar and signals ‘all is ok’.  But a number of analysts believe it could just be the trigger for setting gold off to the upside.  Again, listeners to our Weekly Wrap know full well the supposed US recovery is much weaker in reality than in the minds of hope fuelled markets.  Analysts believe the share and bond markets are dangerously overinflated and a rate rise, if even modest or token, could trigger the crash waiting to happen.  As we commented yesterday, a US crash will be far more bullish for the gold price than anything going on in Europe.  A major US lead crisis could see loss in faith of the USD and bonds, leaving gold as the ultimate safe haven as it has been repeatedly over thousands of years.  The other thesis by some is that an interest rate rise is a sign they are worried about inflation – and as we all know, gold loves inflation.