Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
How Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
GOLD HAS LOTS OF POTENTIAL DOWNSIDE - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Drives Gold Prices? (Don't Say "the Fed!")

Commodities / Gold and Silver 2021 Jun 11, 2021 - 07:16 PM GMT

By: EWI

Commodities

Excerpted from Elliott Wave International's new FREE report "Gold Investor's Survival Guide: 5 Principles That Help You Stay Ahead of Price Turns."

There is a glaring hole in the popular understanding of what drives gold's price.

Mainstream finance believes the Federal Reserve's monetary and interest rate policies shape the trend.

That sounds like a solid explanation... except, the Fed officials themselves disagree!


Consider their own statements:

In July 2013, Fed chairman Ben Bernanke told Congress he "doesn't pretend to understand gold prices... nobody does."

Bernanke's successor Janet Yellen later concurred: "I don't think anybody has a very good model of what makes gold prices go up or down."

And at the 2014 New Orleans Investment Conference, perhaps the most famous Fed chair, Alan "the Maestro" Greenspan, explained that gold's "value...is outside the policies conducted by governments." (You know, like the highly revered quasi-government institution he used to be the head of.)

Despite the uncertainty voiced by the three most recent Fed chairs, mainstream analysts today still believe the Fed's monetary policy pushes around gold's price.

Investors accept this idea as fact because they hear it endlessly. But the notion is simply not accurate. As a result, these investors find themselves on the wrong side of the trend time and time again.

Fortunately, you don't have to be one of them.

Principle #1: Forget the fallacy that "gold follows the Fed."

Consider this chart of gold prices alongside the Fed's monetary policy since 2011.

First red arrow: In 2011-2015, gold prices plunged 40%. By mainstream logic, gold's freefall must have coincided with hawkish Fed -- because higher rates make other investments besides gold more attractive, so gold prices fall. Right?

In fact, it was just the opposite. During the same period, in 2011-2015, the Fed left interest rates at their lowest level ever, 0% to .25%. But that's not all. The Fed also injected $4.5 trillion in stimulus into the markets and economy during this time via quantitative easing. According to conventional wisdom, either action should have pushed gold's price higher -- and together, MUCH higher.

Yet... gold fell over 40%!

First green arrow: Now look at December 2016 - August 2019, when gold prices moved mostly higher. That must mean the Fed was LOWERING interest rates at the time -- right?

Nope! During this time, the Fed RAISED rates eight times -- and QE had long been retired. Gold rose anyway.

Second green arrow: Next, look at November 2019 - July 2020. The Fed cut rates five times and launched QE4 in January 2020. Gold fell, right?

Ha! Despite the dovish Fed and the new QE, gold's rally resumed.

Second red arrow: Lastly, look at August 6, 2020. The Fed said it'd keep rates near 0% indefinitely and inject trillions in new stimulus money. Did gold rally?

Yeah, right! Gold prices peaked and turned down.

If anything, since 2011, the mainstream's understanding of the Fed/gold relationship has been backward.

Except, there is an even better explanation. Read it now in EWI's new "Gold Investor's Survival Guide." You'll learn an objective method to help you forecast gold's price moves, how to identify and stick with gold's trend and more. A $49 value, yours FREE. Get it now at elliottwave.com.

This article was syndicated by Elliott Wave International and was originally published under the headline . EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in