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Why RISING Rates Are a Screaming "Buy" for Gold...By
Tuesday, August 5, 2014
Simple logic would tell you to sell gold when the Federal Reserve raises rates... not to buy it.
But the truth is, based on history, the price of gold actually soars in the 12 months before the Federal Reserve raises interest rates.
Chances are the Fed will raise interest rates in 2015... so we are in that 12-month period right now. (I explained why rates will likely rise next year in this recent DailyWealth.)
I know today's message will surprise you... But we have a fantastic opportunity to buy gold today, before the Fed hikes rates.
Let me explain...
Logically, gold should do well when interest rates are near zero – not when the Fed is raising interest rates. But history shows that's not actually the case...
You see, when rates are near zero, there's no penalty for owning gold (which pays you no interest). When interest rates rise, on the other hand, you're giving up a potential yield on your money in order to hold gold. That yield should discourage gold demand and hurt gold prices.
The problem is, markets don't always work based on simple logic. And in the case of gold, rising rates actually gives us a fantastic opportunity...
We sized up over 40 years' worth of data. We looked at all the times when the U.S. moved from periods of low or falling rates into periods of rising rates.
History shows that the biggest gains in gold come roughly one year BEFORE the Fed raises rates.
The numbers get a little crazy. But they're absolutely true. The table below has the full details...
As you can see, buying gold one year before the Fed raises rates leads to massive gains. One year before rates rise, gold increases 20%, based on history... crushing the "buy-and-hold" one-year gain. And most of the gains come in the first six months, as the table shows.
In short, we want to own gold before and as the Fed raises rates.
The Fed will almost certainly raise interest rates in 2015. So we want to own gold today.
I know this will seem illogical and backward to many investors. Rising rates "should" hurt gold. But history tells a different story.
With rising rates on the way next year, gold is in a prime situation to soar.
The simplest way to invest is through the SPDR Gold Shares (GLD). Based on history, this simple fund could be good for 20% gains over the next year. Don't miss out.
Good investing,
Steve
Further Reading:
"It's time to own gold stocks," Amber Lee Mason writes. "The problem is, gold stocks are extremely dangerous for the average investor... So today, I'm going to cover one of the biggest mistakes investors make with gold stocks." Find out what it is right here.
Amber recently walked her DailyWealth Trader readers through an opportunity to buy gold at a big discount... by buying closed-end funds. These funds can be "the closest thing to free money you'll find in the investment markets." Learn everything you need to know right here.
Market NotesAMERICA'S ENTERTAINMENT COMPANY CONTINUES TO SOAR Shares of Disney (DIS) have tripled in value since October 2011... and that's good news for America.
Over the past few years, we've profiled the big bull markets in industrial stocks, homebuilders, hotels, and transportation stocks. We figure that if these sectors are enjoying rising profits and soaring stock prices, the economy can't be doing all that bad.
Another great sign is the recent business and share-price performance of Disney. Disney is one of America's largest media and entertainment companies. When folks have enough money to spend on cable TV, movies, and vacations, Disney prospers. It is THE iconic brand in American entertainment. Thus, its share price is a solid gauge of what's going on with the economy.
Today's chart shows things are still going well. Our chart tracks the performance of Disney shares over the past three years. As you can see, Disney shares recently set a new all-time high, and are up more than 200% since late 2011. We look at Disney's rising revenues and soaring stock price and say, "things can't be that bad."
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