The price of gold has been fluctuating unusually for the last few years and hit a record low in the month of December 2015, to a price of $1045. The prices shot up in the following two years, and at the start of the current year, it was valued at $1360. Introduction of some aggressive reforms by the U.S. Federal Reserve headed by Jerome Powell, gold indeed has lost its luster. Currently, the pressure has expanded across a variety of commodities and the recently popular market currencies. The prices of gold have suffered due to the frequent increase in interest rates, including the projected premature ending of the dollar hike cycle which came as a surprise to the traders and investors. This scenario is pushing the investors to take a step back and give second thoughts on trading gold and making it a part of their portfolio.
A Yield Curve depicts the situation of the current market and has the ability to determine the onset of a recession. Currently, short-term treasuries have noticed a hike in rates which is gradually increasing whereas the rates of long-term treasuries have somewhat been stagnant. This is one of the factors leading to the flattening out of the yield curve. This is the breaking point of the curve, further hikes in rate by the Federal Reserve would cause a further dip on the curve resulting in an invertion and theoretically, it happens during a recession. In the real world, an inverted yield curve does not literally cause a recession but is an excellent pointer for predicting the occurrence of a recession in the near future. According to the stats, an inverted yield curve has always resulted in a recession of different magnitudes. It stirs up the confidence of the investors on short-term schemes. Such investors demand high rates for short-term Treasuries as compared to long-term investment options. In the situation of the yield curve getting inverted, the Federal Reserve has to roll back the changes by lowering the interest rates. This is the scenario when gold finds back its value in the market and encourage investors to add gold to their trading portfolio.
It is the view of investors and traders that with an increase in the inflation rate, the dollar strengthens accordingly as it is assumed that the Federal Reserve will continue hiking the rates. One portal where each can keep up-to-date with the market analysis is Trd Premium.
But this is not true, as a steep increase in rates will result in the servicing debt in the system to become a problem for everyone. The precious metal has a rich history of consistently making it through recessions with flying colors. So, it is evident that in the case of increased inflation with the Federal Reserve portraying a defensive stance on the rate, the actual rate of interest is bound to go below zero which will prove to be bullish for gold.
The current market scenario is not favorable for investors to invest in gold as the Federal Reserve has an aggressive outlook towards hiking the rates. Experts in this field are expecting two hikes in the current financial year. A positive economic outcome will encourage the Federal Reserve to maintain the same course of action. The experts also urged the traders and the investors to keep monitoring the yield curve as it the most accurate parameter to date for predicting upcoming recessions. But the traders with the idea of using gold as a hedge can look into the platform provided by MarketsPremium. This would enable them to understand the market better and make calculated moves in order to take advantage of the opportunities that might surface in the upcoming months.