Why the Fed might not be able to put a stop to gold’s run
“‘If you look at gold on a very long-term basis, there is literally very little correlation between interest rates and gold,” Boris Schlossberg said Monday on CNBC’s ‘Power Lunch.’ ‘Basically, gold rose when interest rates rose in the ’70s, gold rose when interest rates declined in the ’90s,’ so the likely effect of Fed rate rises isn’t straightforward.”
MK note: One of the lessons I can pass along from many years watching the gold market, and working within it as a purveyor of the metal, is that none of the well-worn mantras and correlations carry much value in predicting short-term prices. For the most part, they are simply fodder to fill the trough of journalists charged with the responsibility of providing an explanation, realistic or not, for any given day’s market performance. In that respect, Mr. Schlossberg breaks down in one neat sentence the relationship between gold and interest rates, i.e., there isn’t one. That will not keep the Fed from jawboning, nor will it curtail market speculation on the prospective results – whatever course the central banks ultimately takes.
Only the wisdom meted out by the market itself in countless situations down through the centuries carries any real value with respect to gold and gold ownership. In the end, the most enduring lesson history teaches us about gold is that it will protect its owners over the long run no matter what the central banks and governments dish out in the way of failed, or even successful, economic policy. It really gets down to a simple notion: One either believes in the transcendence of gold when it comes to matters economic, or one does not.
That is why the quote on our home page from Thomas Bailey Aldrich has been enshrined there nearly from day one of this website: “The possession of gold has ruined fewer men than the lack of it.” That simple bit of advice has not only protected our clientele over the years; it has built significant wealth. The Fed might attempt to put a stop to gold’s run in terms of the price, but it cannot put an end to global demand, or dislodge the metal of kings and the king of metals from the place it holds in the human heart.