Gold plunged following the Fed’s announcement that they were not only raising interest rates, but looking at 3 rate hikes in 2017. If each of these was the usual quarter-point, that would mean a base Fed rate of 1.25%, or 5 times as high as rates were through most of 2016.
Apparently the Fed is either rejecting what many called the summer’s insanity of negative interest rates, or finally deciding to believe their own talk about the US economic recovery. Since before he was called The Gold Enthusiast, it seemed odd to The Gold Enthusiast that the Fed would say the economy was “strong” and “well recovered”, yet discuss negative interest rates.
Now Janet’s crew seems to have planted its flag firmly on the “we believe in recovery” side. But I don’t hear them thanking president-elect Trump… whose election sparked the latest run up toward the mythical 20,000 Dow mark.
In perspective, a 1.25% base Fed rate is still low. Before the 2008 market drop, rates were running about 3.25% if memory serves. So we’re not even talking about back to half-normal rates yet. And we’ll bet your local bank savings account rate hasn’t budged a bit in the last 3 months.