Commodity Trade Mantra

Posts Tagged ‘Negative Real Rates’

Negative Real Rates to Drive Gold Prices Higher Despite Fed Hikes

With arguably the two biggest drivers of the gold price trending in the yellow metal’s favor, gold prices are likely to go higher. Although the dollar could rise if Washington implements some structural reform, real rates aren’t headed higher anytime soon based on the Fed’s actions. If past is prologue, as inflation rises over the coming months, gold will do very well.

7 Federal Reserve Tools and Why They’re All Flawed

Here is a survey of seven Federal Reserve tools in the Fed toolkit to stimulate the economy if recession or deflation gains the upper hand and why their toolkit is flawed. Their toolkit consisting of interest rate hikes to fight inflation, and a litany of tools to fight deflation, shows that the Fed will be fully engaged in manipulating the U.S. economy for an indefinite period of time.

Optimistic Or Pessimistic - Bullish Case for Gold is Clear to All

Throughout 2017, gold should be supported by even deeper negative real rates, which could fall to their lowest level in two years as inflation outpaces nominal interest rate increases. Gold has tended to rise when real rates (what you get when you subtract inflation from the federal funds rate) fell into negative territory. Being optimistic helps you to see the opportunities that others might not.

Global Economy Poised on a Knife-Edge Between Inflation & Deflation

The global economy is poised on a knife-edge between inflation and deflation. The inflationary vector could dominate quickly, based on a combination of Trump deficits & Fed accommodation. Conversely, the deflationary vector could dominate based on fundamental factors such as a strong dollar, deleveraging, demographics & technology combined with premature Fed tightening.

Choking Inflation is last thing the Fed wants now - Good for Gold

The Fed will not raise rates for the fun of it. The Fed wants to keep inflation under control, but what the organization really wants is negative real rates. That’s where inflation is higher than nominal rates. It does the Fed no good to raise rates unless inflation is going up even faster. Yet that’s exactly when gold does its job of preserving wealth.

Is Gold and Silver Bull Market Intact or will US Dollar Strength Crush it?

Conventional wisdom would tell us with the US$ index nearing a major breakout, gold and silver would be vulnerable to further losses. Ultimately, as long as Gold and silver’s fundamental driver – declining or negative real interest rates remain in place, then the fledgling bull market will remain on track. With inflation poised to rise, real rates are likely to decline further in 2017.

The Rally in Gold Prices is Just Getting Started

It’s been a stellar six months for gold investors. The yellow metal has surged 28% year-to-date, its best first half of the year since 1974. And now there are signs that the rally is just getting started. About $10 trillion worth of global government debt now carry historically low or negative yields are contributing to gold’s attractiveness right now & pushing it up on a new bull run.

Inflation, Investment and Savings - Where do we stand now ?

There’s a clear relationship between periods of rising prices (inflation) for essential items & negative real rates, & this undermines the dollar value. Investors then seek alternatives such as gold, oil & agricultural land. Actual income of the low income group varies more when measured against the price of necessities rather than the broad CPI.

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