Gold is up 11% this year but it has been flat in the last month and the last year since Donald Trump was elected. In fact, the closing price for gold on the day Trump won the 2016 election was $1,282. Exactly a year later, gold closed at nearly the same price ($1,284) on November 8, 2017.On election night, gold soared briefly but then fell over the next month to a low of $1,125 on December 20, 2016.Gold’s high in Trump’s first year was $1,346 on September 8, 2017. Gold is still on track for its best year since 2011.
“Despite Rate Hike, Gold Seems Headed Up” – Barron’s, November 6, 2017
The next meeting of the Federal Open Market Committee (FOMC) is scheduled for December 12-13. According to the latest poll by CME FedWatch, there is a 91.5% chance that the Fed will raise short-term interest rates by 0.25%. That’s important because in the last two years the Fed raised rates in mid-December and that caused gold to RISE SHARPLY. The pundits in most non-gold-oriented publications tend to predict that gold will go down when interest rates rise, since “gold offers no interest income.”
But here are the facts surrounding the Fed’s last two mid-December rate increases:
- On December 15, 2015, gold bottomed out at $1,049 (on the London pm gold price fix) the day after the Federal Reserve raised rates for the first time in almost 10 years. Gold immediately took off and rose by almost $200 per ounce to $1,241 in less than two months (by February 11, 2016).
- On December 20, 2016, gold bottomed out at $1,125 on December 20, shortly after the Fed raised rates again. Gold then rose gradually to $1,257 in February and $1,346 by the next September.