Why would gold prices move based on the Federal Reserve’s interest rate decision? They’re obviously market forces, but how can they affect the gold price? What actually determines a rise or fall in the price of gold?
If we examine the past four price movements we can come up with some insight as to why these price movements occur. Let’s see if the Federal Reserve interest rate decision can make the difference between more high-interest debts or a low-interest debt.
Back in December 2020 economic issues were dominating most of the news. Recession was expected and there was talk about a stock market crash. In short, people were on edge and nervous about economic issues.
The Fed decided to raise interest rates and this set off a flurry of economic reactions. For example, the NYFed, one of the Fed’s regional banks that facilitate financial activities, announced that it would be reducing its two-year Treasury Note contract from 2.8% to 2.7%.
A few weeks later on January 6th, 2020, the first silver futures contract was traded, and silver were pushing higher as a result. When the last call trading ended silver was trading at $14.45 an ounce. It’s now hovering at $16.00 an ounce.
On the next day the yield curve reverses direction and it begins to tighten and moves lower. However, the cut backs in borrowing costs don’t have much of an effect on the yield curve. The yield curve rises and in turn makes silver stronger.
Then, the Fed announced that it was going to hold off on lowering rates, but by this time it was obvious that central bank decisions had no impact on the silver market. In fact, that looks like it was a game changer.
People who’ve been watching the silver market for awhile now are seeing how the silver price is actually affected by various events that unfold. Things change in time, but the key to understanding how a market behaves is to understand how it is affected by current events.
You see, you have to take all of the recent events that have taken place into consideration when determining how far the price of silver will go. In other words, you need to determine what has happened in terms of economic events.
Of course, you need to look at the fact that the recent economic downturn was caused by a real estate collapse. There was so much construction occurring that the price of homes fell so rapidly that people couldn’t afford them and soon, people began to default on their mortgages.
You see, when these economic issues begin to unfold, it causes monetary authorities to tighten their lending standards. This causes the prices of bonds and equities to come down, and the fundamentals of an economy are altered.
The silver price has always been well-informed by economic events. Don’t miss out on the next amazing market trend, sign up below to receive my FREE report.