Interest Rates and Gold: Reversal vs. Range Bound

OWNx Team Global Finance and Economics, Gold & Silver Market, News & Current Events Leave a Comment

As interest rates signal a trend change it is important to consider all the possibilities. Certainly one can make a case for rising interest rates due to inflationary pressures. However because of all the cross currents that rising rates and a strong dollar would create, it is possible that it will be years before we see a major upward thrust in interest rates.

In his article “Secular Shift in Interest Rates,” Matthew Kerkhoff makes a case that we could see the continuation of a five year sideways movement of rates, bound within a range of 1.5% and 3% on the 10 year US Treasury. Is this possible?  Absolutely.

With massive sovereign debt, the governments of the world are in no way cheer leading for higher rates. Above 3% budget deficits explode. Yet these same governments are cheer leading for stronger economic growth and relief from a persistent threat of deflation. If they get their way, natural market forces would agitate for higher rates. There is the rub. While they do not want higher rates, they want the conditions that generate higher rates.

These competing needs could produce a tug-of-war that extends the time period where rates remain bound in the 1.5% to 3% range. Such is the tangled web governments and central banks have weaved post the 2008 crisis.

What then happens in the spot gold and silver markets?

It is possible that with a tug-of-war in interest rates, gold and silver prices may continue to be range bound for awhile as well. However, if this tug-of-war creates uncertainty and instability in the financial system, gold and silver prices very well could lead interest rates to the upside in the years to come.

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Gold and Silver Turn Higher After Post Election Slump

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One of the prominent financial news commentators said two weeks ago, “A wise strategy would have been to buy the election and sell the inauguration.” He was talking of course of the broader markets and not gold and silver. That may turn out to be correct.

As reality begins to set in on the uncertainty of the new administration’s goals and their ability to deliver them, a heated up market could take a pause and rethink its recent run up. Trade agreements on the chopping block have softened the dollar, giving way to a mini-rally in silver and gold bullion prices.

Gold climbs near 10-week high in Trump era as dollar wobbles

This all feeds continued volatility in the broader markets while gold and silver bullion continues to build a long term base for the next multi-year leg higher.

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Refinancing in a Rising Interest Rate Environment

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A rising interest rate environment will have an effect on the price of gold and silver. That’s something most gold and silver investor understand. However interest rates affect a great deal more than just the price of precious metals.

One of the largest impacts it has on most people’s pocketbooks increased mortgage rates. Over the past several years the low and falling interest rate environment has been a boon to those wanting to refinance.  Now that the tables have turned, what should you do if you are considering refinancing your mortgage?

In his article, Refinancing Tips When Rates Start To Rise, Richard Barrington with the “Get Rich Slowly” blog gives you these 5 refinancing tips:

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President Trump and the Strong Dollar Double Edged Sword

OWNx Team Money & Financial Technology, News & Current Events Leave a Comment

Now we will start to see reality begin to become real in our financial and economic systems. Today, a new President takes over. Regardless of your opinion on the matter, he is going to implement policies that if successful will put sustained upward pressure on the U.S. dollar. A strong dollar in 2017 however is much different than a strong dollar in 1997. The fundamental nature of the global economy has changed, and the structure of the global financial system is radically different.

Because of high US tax rates on businesses, estimates are that there is up to $3 trillion in profits held by US companies outside of the country. If corporate tax rates are lowered to 15% to 20% as President Trump proposes, a trillion dollars could flow back into the United States. This would create a tremendous demand for dollars for those profits held in other currencies.

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Bitcoin Got a Lot Right – But Not Everything

OWNx Team Cryptocurrencies, Global Finance and Economics, News & Current Events Leave a Comment

Since it’s inception in 2010, Bitcoin has been the subject of a great deal of spilled digital ink. The idea of a currency outside of the control of governments has been the dream of libertarians and an interesting idea for many fiscal conservatives. However, as much as Bitcoin brought to the table, it missed a very important variable.

That variable is volatility. As long as the price of Bitcoin remains as volatile as it is, it will not assume a place as a truly viable currency. People will not tolerate the sharp rise and fall in prices of a currency. Period. Won’t happen.

Imagine if the purchasing power of your dollars rose and fell by double digits within a few days or weeks on a regular basis. You’d search for some form of stability in any money you held beyond a few days. In other words, you would not trust the short term store of value attribute of your money and you would seek an alternative.

Today, we have national currencies that are relatively stable compared to Bitcoin. If those national currencies began to fluctuate because of financial system instability and burdensome sovereign debt, would Bitcoin become a viable currency? Not likely. It is too ill liquid and thus in that scenario, the volatility of the Bitcoin price would make today’s price fluctuations pale in comparison.

Gold and silver prices, while experiencing periods of volatility, would provide a stabilizing factor to the overall purchasing power of your savings. That’s why we do what we do. Accumulate gold and silver. Protect your retirement funds.

Bitcoin gave us the blockchain, which will revolutionize industries across the board. It opened our minds as to the possibilities of what money can and should be. As a currency however, it will likely struggle to find a viable, long term place in our present monetary system. In a future monetary system? That could be a different story.

Bitcoin plunges as Chinese authorities step up scrutiny

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The Interest Rate “Line in the Sand” – Bill Gross Sounds Off

OWNx Team Global Finance and Economics, News & Current Events Leave a Comment

Analysts have been calling for the end of the three decade old bull market in bonds for several years now. To be sure, if transitional market forces (read non-government intervention) were allowed to exert force on the bond market, rates would be much higher than they are today. So why does Bill Gross see 2.6% on the 10 year Treasury as the line in the sand?

According to Gross, it has some to do with inflation. If yields pass that mark, then it will indicate that inflation has taken hold after years of attempts by global banks to do just that. However, this is a very sharp double edged sword. Higher rates due to an economy that is heating up would cause government budget deficits to explode to the upside. That in turn would hasten a looming sovereign debt crisis.

We would tend to agree that the 2.6 to 3% range is a key to watch in US Treasuries. Rising rates due to dollar strength are negative for the price of gold and silver. However rising rates due to inflation would be bullish for gold and silver. Right now we are in a tug of war between these views.  Either way, it appears as though 2017 may be a major transition year for long term rates – and for the long term price of gold and silver.

This is another reason why it is important to keep accumulating these assets. They act as a hedge against both inflation and financial system instability. In the years ahead, we may see either – or both.

‘Bond king’ Bill Gross draws line in sand for 10-year yield

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Silver and Gold Prices in 2017 – The Path Will Not Be Straight

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After a roller coaster year, the price of gold rose nearly 8%, which almost kept pace with the 8.8% increase in the S&P 500. So, where does the price of silver and gold go in 2017?

There are so many cross currents in the world today it is difficult to tell where the price of gold will be on December 31, 2017. Just a few of the factors gold will have to contend with:

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Gold Continues to Carve Out A Long Term Bottom

OWNx Team Gold & Silver Market, News & Current Events Leave a Comment

The price action of gold over the last few weeks is consistent with a notice we put out in April of last year to our clients.  In that notice we informed them that the price of gold’s late 2015 drop to $1,050 and subsequent recovery and breakout of a 4+ year the technical downward trend line set the stage for a possible multi-month consolidation.

The consolidation has now lasted nearly a year and it may not be over yet. It is possible that we will see an extended period of choppy price movement between the 2015 low and subsequent 2016 high in the $1,370 range as the impact of the unprecedented geopolitical events of 2016 becomes better understood.

For those who steadily accumulate gold and silver with a medium to long term horizon, this is good news. While every investor wants to see their holdings grow in value, any opportunity to own more ounces at a lower price is welcome. Meanwhile, for those who take advantage of the price swings that accompany consolidation patterns, being able to buy and sell physical gold and silver immediately is also welcome.

Gold has recently risen from it’s December low around $1,130 to nearly $1,200 today. From here it could go either way in the short term. Longer term, we continue to see favorable price projections in the years ahead that are considerably higher than today’s levels. We will continue to be here to help you achieve your financial goals.

Gold Futures Rally to Near 7 Week High Near $1,200

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Divergence in Gold ETFs Signal Bottoming in Price?

OWNx Team Gold & Silver Market, News & Current Events Leave a Comment

Recently there has been some divergence in the inflow/outflow of gold into two separate ETFs. The larger SPDR Gold Shares ETF has seen weekly outflows since mid-November. However, the smaller iShares Gold Trust has seen two weeks of inflows. What does this mean?

The larger ETF is mainly used by big institutional investors and the smaller one is more often used by individuals. It simply means that there is disagreement among these two sectors on how and when to invest in gold as the gold spot price stabilizes from a multi-week selloff.

The reasons for the selloff are many. A stronger dollar, a strengthening economy, and rising interest rates all play a role. However, there are questions as to just how quickly the Trump Administration’s tax cuts and rollback of regulations will happen and how effective they will be in the face of massive sovereign debt issues and banking instability in Europe.

Until a verified change in trend has occurred in the gold and silver market, it is wise to continue with a strategy of buying the dips or steadily accumulation.  Also, as tax season approaches, remember that you can own physical gold and silver in a self-directed IRA.

Trumonomics Divides Investors as Gold ETF Flows Diverge

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Changes Coming to Your 401k: Will it Affect Access to Gold and Silver?

OWNx Team Money & Financial Technology, Retirement Planning Leave a Comment

Here at OWNx, we understand that owning gold and silver are only a part (but an important one!) of your overall financial wellness and retirement plans. As such, it is important to know about changes coming to your 401(k) plans in 2017.

According to a recent MarketWatch article, beginning in April, financial advisers will be under new regulations that are designed to protect 401(k) plan holders from inflated fees.  While this is a noble goal, the “fiduciary rule” also means that plan advisers will become more limited in which investment products they can recommend.

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