Important NIA Update on the Fed and Gold

One year ago, leading into the most overhyped and ridiculously telegraphed 25 basis point Fed Rate Hike in history – the mainstream media was busy spreading false propaganda about gold being the worst asset that any investor can possibly own during a Fed Rate Hike Cycle. The narrative in the media was that gold yields zero, so if interest rates are rising – gold will become less attractive relative to U.S. Treasury bonds and money-market funds – thereby causing relentless selling in the gold market. If asked about the possibility that rising interest rates will also make stocks less attractive relative to bonds and cause the S&P 500 to decline, the talking heads in the financial media laughingly dismissed the question as ridiculous – noting that it’s the strengthening U.S. economy that is allowing the Fed to raise rates – and they certainly wouldn’t do so if the stock market couldn’t handle it.

On November 10, 2015, NIA sent out an alert entitled, ‘Why the Fed Must Raise Rates in December!’ which explained that the probable December 2015 rate increase, “has been priced in to the U.S. dollar, precious metals, and gold/silver mining stocks for 2 1/2 years – starting from when rumors first began circulating that the Fed might begin to taper QE3.” NIA discussed how the media was doing everything in its power to, brainwash the public that a Fed Rate Hike is doomsday for precious metals and gold/silver miners.” NIA predicted to its members, “Precious metals and gold/silver mining stocks will make their largest short-term rally in history, as soon as December’s rate hike is out of the way.”

Less than a week later on November 16, 2015, NIA published an exclusive, priceless analysis of historical Fed Rate Hike Cycles – comparing the performance of gold vs. the S&P 500. NIA’s report concluded that during previous Fed Rate Hike Cycles that began with a Fed Funds Rate of less than 5% – gold on average has gained 30X more than the S&P 500!

In 2016, NIA’s report proved to be extremely accurate! Gold in 2016 achieved a peak gain of 26.82% following the December 2015 rate hike. Although gold has experienced a healthy pullback from its July 6th high of $1,367.10 per oz to a current price of $1,191 per oz – NIA believes that gold will explode well past $1,367.10 per oz in 2017! Look for gold to begin its next major rally as soon as next month’s probable rate hike is out of the way!

Historically, gold has achieved its largest price gains after the second rate hike of a new Fed Rate Hike Cycle!

In March 1972, a new Fed Funds Rate Hike Cycle began when the Fed raised rates by 200 basis points to 5.5%. The second rate hike of that cycle didn’t occur until January 1973. During the 10 month period in between, gold increased 34.78% to $65.14 per oz – equal to an average gain of 3.478% per month.

Immediately after the second rate hike, gold prices began to explode! Over the next 5 months, gold rallied 84.4% to $120.12 per oz  – equal to an average gain of 16.88% per month. Gold rose 4.85X faster after the second rate hike!

fedfundstargetratevsgold1972-1973

In December 1976, a new Fed Funds Rate Hike Cycle began when the Fed raised rates by 113 basis points to 5.88%. The second rate hike of that cycle didn’t occur until August 1977. During the 8 month period in between, gold increased 8.27% to $144.95 per oz – equal to an average gain of 1.034% per month.

Immediately after the second rate hike, gold prices began to explode! Over the next 19 months, gold rallied 113.25% to $391.66 per oz – equal to an average gain of 5.96% per month. Gold rose 6.33X faster after the second rate hike!

fedfundstargetratevsgold1976-1979

In June 2004, a new Fed Funds Rate Hike Cycle began when the Fed raised rates by 25 basis points to 1.25%. The second rate hike of that cycle occurred in August 2004. During the 2 month period in between, gold increased 2.075% to $400.51 per oz – equal to an average gain of 1.0375% per month.

Immediately after the second rate hike, gold prices began to explode! Over the next 21 months, gold rallied 68.63% to $675.39 per oz – equal to an average gain of 3.27% per month. Gold rose 3.15X faster after the second rate hike!

fedfundstargetratevsgold2004-2006

On average, gold rallied 4.78X faster after the second rate hike of the only three comparable Fed Rate Hike Cycles that began with a Fed Funds Rate of less than 5%!