Do Fed rate decisions affect the price patterns for gold? kitconews gold silver mining metals finance economics investing
Many traders are focused on Gold as price has contracted over the past 5+ weeks, and the $1700 level is being retested. This prompted my team and I to do some research related to the US Federal Reserve’s recent rate increases and how Gold has previously reacted to rising and falling interest rates.I knew from the 2008-09 Global Financial Crisis and the 2020 COVID-19 event that Gold initially moves downward as extreme selling pressures drive almost all assets lower.
I quickly learned that Gold tends to stay fairly muted through Fed rate increases and decreases in the absence of Fed QE functions. Yet, I learned something even more extraordinary about how Gold trends within extended Fed QE Functions: The Two-Stage Capitulation Bottom.This unique pattern seems to be associated with extended fear related to the US Fed decisions to print extended capital and provide extraordinary capital support for global equity markets and the economy.
Each of these Gold rally phases was accompanied by a second-stage Gold rally when the US Fed suddenly reversed direction and started lowering Fed Funds Rates. It appears this panic by the Fed sends a jolt of fear into the markets – driving Gold & Silver into a potential parabolic price trend if the conditions are right. Here are some examples.The most recent examples of this two-stage precious metals rally pattern happened in 2008-09 and 1999-2001.