Monday, August 29, 2016

Expect Gold Profit Taking: Fed Chair Yellen's Speech Hints To Multiple Rate Hike Scenario

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*Thursday's update on gold called for gold to take a breather based on potential multiple rate hikes.
*As global investors brace for a rate hike in the US gold should see profit taking.
*Gold is still good long term but short term, even though Fed Chair Yellen's speech was less than expected, likely has limited upside.

After getting bullish on gold (NYSEARCA:GLDJune 20th we pulled back on our opinion last Thursday. We ultimately think there is a risk to multiple rate hikes as the Fed finds themselves in their potentially most inflation complacent state in history. For that reason they have to likely raise rates as much as they can get away with. Short term foreign investors likely believe in a rate hike. Medium term if the economy holds, the Fed likely needs to get rates back to 2-3% Fed Funds. That path would likely stall gold.
Fed Needs To Raise Rates To Have Strength In The Next Recession
We think this comment by the The Fed Chair on Friday has meaningful implications for gold investing,
"Analysis certainly overstates the FOMC's current ability to respond to a recession, given that there is little scope to cut the federal funds rate at the moment."
Please know that the italicized "current" was done by the Fed to accentuate the dangerous state the economy is in if we were to hit another recession today.
The Fed is in a position that having rates at all time lows of .5% leaves them little "scope" (room) to drop rates further. That means that any chance they get they would need to get rates back up to the historical 3% so that they can have some potency in the next recession. That is a message of multiple hikes.
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Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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