Quick observation on gold being up sharply this morning
Many who offer up their analysis on the gold market will attribute today’s sharp rise to the geopolitical environment, which is fraught with danger to say the least and certainly a contributor. But that’s not the whole of what is driving the gold market in recent days. A second, and not-to-be-underplayed, factor is the prevailing and publicly well-cultivated policy of the Federal Reserve toward interest rates, up to and including Janet Yellen’s most recent comments.* The first provides momentum to the second – license.
* “Looking forward, I think the economy is going to continue to grow at a moderate pace. Our job is going to be to try to set monetary policy to sustain what we have achieved.” Janet Yellen as quoted in New York Times/4-10-2017
The markets will read “accommodation” in those words meaning the Fed will do what it can to make sure the interest rate tracks behind the inflation rate and creates a negative real rate of return on yield bearing assets. That latter, a negative real rate of return, has underscored, driven and sustained bull markets for gold in the past.