It’s February and things are getting interesting again in the Financial Markets as speculation runs rampant about whether the Federal Reserve is going to imminently cut Interest Rates. In many ways it looks like a Game of Chicken between the Fed and Mr Market and we’re about to see who flinches first.
The market has already started selling off Regional Banks in the US, potentially sparking off a fresh round of Bank Runs while the Fed is trying to hold the line and resist the expectation they will start cutting rates as soon as March. This is all in the context of a big Presidential Election Campaign that is building up a head of steam this year so the politicians are likely to have some influence on how this goes down as the political campaigning begins in earnest.
Meanwhile, Gold has been coiling up in its price action and getting ready to make a big move. Personally I think that regardless of what happens that move in Gold is likely to be UP. If the Fed cuts rates then that’s going to be Inflationary and there is no better long term hedge against inflation than Gold...while if the Fed holds the line and the Market kicks off a fresh round of Bank Runs then we’re going to see a Flight to Safety...which also typically means capital flows into Gold.
It’s a great time to be holding Gold in my opinion. This month is going to be really interesting so keep an eye out! It is certainly no time to be asleep at the wheel.
DISCLAIMER – This is not financial advice