Gold stabilizes as day wears on, unsure how to react to rate environment


Gold stabilized as the day wore on seemingly unsure how it should react to the 10-year Treasury establishing itself firmly above the 3% mark at 3.031%. It finished the day down $9.50 at $1322. Silver closed down 18¢ on the day at $16.57. Reuters reports rates being generally driven higher by the “growing supply of government debt and inflationary pressures from rising prices.” If that is truly the case, it is difficult to explain gold’s downside today. Historically, those two maladies – inflation and government debt – have served as inducement for higher prices not the opposite.

As for rising interest rates themselves, Investopedia has this to say on the subject: “While popular opinion is that interest rate hikes have a bearish effect on gold prices, the effect that an interest rate increase has on gold, if any, is unknown, since there is actually little solid correlation between interest rates and gold prices. Rising interest rates may even have a bullish effect on gold prices.” So, we shall wait patiently for the market to come to its senses, which if Jeffrey Gundlach is proven correct is something in the works.

Quote of the Day
“The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” – Ernest Hemingway

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