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Here's What Will Happen to Gold If the Fed Raises Interest Rates

By Dr. Steve Sjuggerud
Friday, May 20, 2016

Here we go again...
This time, they tell us, the rate hike could come as soon as June.
This has gold investors worried...
"Gold slides on Fed rate hike expectations," read a headline on yesterday.
Should you worry?
In short, no...
The last time the Federal Reserve raised rates was from 2004 to 2006. Rates went from 1% all the way to 5.25%.
If gold were truly affected by the Fed raising interest rates, then you would think that the dramatic move we saw from 2004 to 2006 would have a devastating effect on the gold price... right?
You'd be wrong. Gold was unaffected. Its price just kept going up while the Fed was raising interest rates. Take a look:

Specifically, exactly one year after the Fed's first interest-rate hike in 2004, gold prices were up more than 10%.
The story was the same the previous time the Fed started hiking rates... in 1999. One year after the Fed started hiking interest rates, the price of gold was up more than 10%.
Just because gold went up 10%-plus in a year the last two times the Fed raised interest rates doesn't mean that it has to happen again...
We can't say that gold will go up 10% or more. But we can say you shouldn't worry so much about the Fed right now.
The last time the Fed started raising interest rates, gold was in a bull market. And higher rates didn't hurt gold.
Today, I believe we're in a new bull market in gold – one that would also be unaffected by interest-rate hikes by the Federal Reserve, just like we saw from 2004 to 2006.
Look, the media might try to spook you about gold and the Fed in the coming weeks...
Pay no attention to it... You know the truth. Gold doesn't care about the Fed, especially when gold is in a bull market.
Good investing,

Further Reading:

Yesterday, Steve showed a simple gold system that returns nearly 17% a year when in "buy" mode. "It beats the market. It has only lost money in one out of the last 40 years," he writes. "And it's so simple a monkey could follow it." Read more here: A Simple, Powerful Gold Signal You Can Use Right Now.
Gold isn't the only asset to benefit from low interest rates. One of Steve's favorite investments is a particularly good deal today, thanks to super-low rates. Get the details here.

Market Notes


Today, we check in on one of our favorite "real-world indicators" to see that the trend in U.S. housing is still going strong.
Over the past few years, Steve Sjuggerud has written at length about the incredible opportunity in U.S. real estate. In short, Steve says that perpetually low mortgage rates are providing a major boost to the housing market.
We can get an idea of how this idea is working by checking in on one of our favorite "real-world indicators." Lowe's is America's second-largest home-improvement chain. Its fortunes rise and fall with America's demand for kitchen upgrades, refinished bathrooms, and home additions. Thus, its share-price trends tell us a lot about the state of the housing market.
As you can see from the chart below, Lowe's share price has nearly doubled in the past three years – and just set a new all-time high. Lowe's isn't alone in its success. Paint company Sherwin-Williams also hit a new 52-week high this week. The housing market continues to impress...

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