The Fed hiked interest rates. Gold & silver were pressured afterwards and the dollar took off like a rocket, but that’s all changed now…
I’ve been saying that gold and silver are ready to shine.
Especially with silver.
And exactly as we need to start seeing by silver leading the way.
OK, “But Half Dollar, it wasn’t a moonshot, they’re only up a little, so how can you call that impressive?”.
It’s impressive because against all pressure, from the mainstream financial press that somehow has everybody convinced that rising rates are bad for gold, to a “hawkish” Fed that somehow has everybody convinced that the economy is booming, gold & silver were hit at the release of the Fed statement for a good thirty minutes, but they refused to stay down.
First of all, what just happened?
The Fed has raised interest rates a whopping 0.25%.
That’s what happened.
For those who wish to stomach the release, here’s a link to the Fed’s June 13th FOMC statement.
Here’s a “redline” of the statement, which is more useful than the Fed’s press release because it shows changes to the statement over time:
The Fed Funds Rate will now float between 1.75% and 2.0%, and since it floats, it means the rate won’t actually get to 2.0%, but rather, interest rates will more likely be around 1.87%.
Regardless, the Fed is seen as super “hawkish” today.
A “hawk”, as opposed to a “dove”, thinks the economy is strong and therefore stronger monetary policy is necessary in the form of interest rate hikes and other “tight” monetary policy actions.
In other words, a hawkish Fed sees the economy as booming.
Here’s the very minute the news “hit the tape” as traders like to say (2:00 p.m. EST):
Of course the cartel is going to hit the sell button on the release of the news.
In fact, it’s not even hitting a button anymore, because the sell order is likely programmed to be automatic. It’s just a matter of the cartel deciding how much to sell to get others to sell.
Ten minutes in, we see the “knee-jerk” reaction in gold & silver (now including the Dollar Index) taking shape:
Remember, and I harp on this all the time – the knee-jerk reaction is usually the opposite direction of where the move is ultimately headed. This reaction can take minutes to about an hour for the actual direction to become clear.
We can see just how much gold was “bought and sold” over the course of the first nine minutes:
That’s a lot of “gold”.
Paper gold, that is.
Gold that doesn’t exist other than on paper and for the purpose of suppressing the price through the smoke and mirrors they call the futures “market”.
Thirty minutes in and we can see the the knee-jerk is gathering momentum:
Feeling nervous 30 minutes in?
What does Half Dollar always say?
Knee-jerk reactions take time to work themselves out.
Sure enough, an hour after the rate “hike”, BOOM:
Gold & silver shrug off the knee-jerk and appear to be going out on the highs of the day.
Remember, $1305 is very important in for gold because that’s basically where gold opened the year.
Anything over $17 in silver we should gladly take, because it means a break-out from the sideways channel of pure agony.
One last chart, approximately one hour and fifteen minutes post-Fed:
Back to the rate hike –
Here’s Bloomberg’s take on the rate hike (bold added for emphasis):
Federal Reserve officials raised interest rates for the second time this year and upgraded their forecast to four total increases in 2018, as unemployment falls and inflation overshoots their target faster than previously projected.
The so-called “dot plot” released Wednesday showed eight Fed policy makers expected four or more quarter-point rate increases for the full year, compared with seven officials during the previous forecast round in March. The number viewing three or fewer hikes as appropriate fell to seven from eight. The median estimate implied three increases in 2019 to put the rate above the level where officials see policy neither stimulating nor restraining the economy.
The Federal Open Market Committee indicated that even though it’s stepping up the pace of interest-rate hikes, economic growth should continue apace. “The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 percent objective over the medium term,” according to its statement following a meeting in Washington.
In other words, the Fed sees the economy as super duper awesome.
That last bolded phrase, “symmetric 2 percent objective” means that if their goal is 2%, but if, say, inflation was at 0% for two years, the Fed is willing to let inflation run at 4% for two years, and that will mean we have a nice and neat average out to 2%.
In other words, the Fed is heck bent on devaluing the dollar by 2% per year (rising prices means less purchasing power, that’s why I don’t say “the Fed wants 2% inflation” but rather “the Fed wants to devalue the dollar by 2%”), but since they claim inflation was lower than 2% for so long, they’re ready to let the dollar devalue by more than 2% per year now.
This ultimately means the Fed is doing some sort of CYA (cover your arse) because they know inflation is picking up, and they know they won’t be able to do anything about it, so they’re making everybody believe that they’re “letting” inflation do whatever it is that it’s doing (which is rising).
See how this whole phony economy is based on a bunch of Fed make-believe?
And if I see this picture of Powell portrayed as “Superman” just one more time, I think my head is going to explode.
Somebody needs to portray Powell as Peter Pan instead for his success at having everybody living happily in the land of make-believe.
But I digress.
No need to go off on a rant today.
Here’s the Fed’s infamous “dot plot” that everybody keeps talking about:
The dot plot is useless, because all it does is show where the Fed governors see interest rates headed in the future, but the dots change all the time, and the Fed, for the last decade anyway, has consistently forecast higher interest rates than they have actually delivered.
But the markets so far have not figured out what rising rates mean.
They will figure it out eventually.
What do rising rates mean?
The short answer: Rising rates mean that assets like stocks, real estate, and bonds bought at very low interest rates are all overvalued and therefore must fall in price.
Sooner or later the markets will figure this out.
And when they do, there will be a mad rush into gold & silver.
Because gold and silver are the true safe haven assets.
Always have been.
Always will be.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.