How Will Gold Prices Be Affected by Interest Rate Increases?

several bars of gold

In 2021, gold has experienced a lot of volatility, suffering the worst crash it has had in six years. It occurred despite an increase in inflation, which ideally should have increased the attractiveness of gold for investors as a traditional hedge against inflation. However, other than a few increases, gold underperformed expectations.

The U.S. Federal Reserve recently indicated in its December meeting minutes that it will likely increase interest rates soon to help to curb rising inflation. In the Eurozone and the US, inflation reached multi-year highs, after many stimulus measures were implemented due to the pandemic.

It has made it necessary for the central banks to make a decisive move. The first financial institution that tightened monetary policy was the Bank of England, followed quickly by the US Federal Reserve, as recently inflation in the US reached its three-decade high. There is speculation that the US Fed will implement three rate hikes at least if not four, this year.

Rate Hikes are Imminent

Interest rate increases are expected soon, and investors have speculated about how they will impact this year’s gold prices, considering the recent performance of gold. In August 2020, gold hit its record high at $2,000 per ounce. However, ever since it has not been able to recover, despite the steady rise of inflation.

Historically, when there has been an increase in interest rates, the prices of gold have gone down, as investors are looking at other asset classes like equities or bonds that are offering higher returns. It is not clear whether this will continue to be true this year for gold, as the exact timeline of the interest rate hikes by the Fed is still unknown.

However, at least for the moment, the sentiment is very positive for gold, as prices keep increasing, including recently reaching a one-week high.

What are Interest Rates?

The Federal Reserve has a target federal fund rate, which is often referred to more broadly by the media as “interest rates,” It is the estimated overnight lending rate set by the Federal Reserve for credit unions and banks.

A certain cash reserve amount must be held by credit unions and banks at the end of every day. Therefore, they tend to borrow and lend from one another overnight to make sure they meet their reserve requirements (or lend excess cash to receive some extra income).

With the targeted federal funds rate, a range of 0.25% is given on the interest rate that credit unions and banks must be within when the interest rates for the overnight loans are determined.

Whenever the Federal Reserve is looking to curb inflation and excess spending, it introduces tighter monetary policy and increases interest rates, which marks the start of a tightening cycle. It then has knock-on effects on almost every public-facing or business interest rate and then almost every asset in turn.

Resilience showed by Gold

Higher interest rates will usually place pressure that leads to reduced gold prices. This makes recent activity with gold much more interesting. Despite tightening, gold is seeing strong support not only with prices but at rates that haven’t been seen since before the financial crisis. Although many people still think that the fundamentals will end up being too large of a barrier this year for gold and that prices will go down, current price action is impossible to ignore and could continue showing strong resilience for quite some time.

The mid-to-long-term sentiment appears to be mainly bearish, as seen by the comment above, the short-term outlook appears o be positive for the most part, with investors still hoping that gold might recover part of the ground that it lost over the past year.

Many analysts believe gold is pushing back to a resistance ranging from $1,730/ounce to $1736/ounce. Although gold has experienced significant resistance over the past year in this range, investors are still hopeful that this year it will finally be able to break through the traditional barrier.

If that happens, most likely gold will reach the high from last September of $1,7990/ounce, which could pave the way for additional gains in the future, or at least until the interest rates have been tightened even more.

Because of the price action in gold, the weakness in the dollar, unstoppable inflation, and rampant government spending, more and more people are trying to protect their wealth with physical precious metals.  To learn more, you may want to read this Goldco Precious Metals IRA review.

Weakness in the U.S. dollar

Gold has benefitted from the weakness of the US dollar, with traders unwinding their aggressive bets on this currency. The pound sterling has steadily gained against the US dollar over the last couple of days, and this trend might also continue over the near future.

Other analysts think that despite the expectations of the markets, there will be significant increases in interest rates over the next couple of months, with investors very interested in gold.

It is also believed by some that if gold can cross a resistance range of around $1,730/ounce to $1,736/ounce, this year might experience more recoveries, while a reduction to around $1,790/ounce could be a sign of further distress.

By contrast, the rise of Bitcoin as well as NFTs and other digital assets might join with interest rate forces to contribute to lower gold prices this year, with more investors turning to these as inflation hedges. It is a trend that most likely will continue to grow this year with more cryptocurrency-linked ETFs making their way to the market, while investors have more choices when it comes to what form and how they want to invest.

There are other dynamics at work as well that must be considered as well such as the pandemic continuing to progress, and demand, and supply chain factors when factoring in increased interest rates on this year’s gold prices.

Gold vs. Trust in Central Banks

However, gold prices are impacted by trust in central banks. When inflation in the US reached a 14.8% high in 1980, in 1981 the Fed responded by increasing rates to 20%. After that gold prices dropped significantly. However, this had very little to do with the actual rates. Instead, rate increases restored the public’s belief in the central banks. In turn, this made it possible for people to think that the Fed had good control over the economy.

In 2012, the ECB’s Mario Draghi said he was willing to do whatever it took for the ration ratio to be preserved. In reality, not much was done by the ECB. However, the words of Draghi were sufficient for restoring trust in the central bank, and in turn, this affected gold as well.…

The Best 401(k) Investments

Your 401(k) offers a range of investment options. The mix of options depends on the choices made by your plan provider. When you are ready to create a 401(k) portfolio that can sustain your long-term financial needs, you must learn more about various kinds of investments.

After you decide to participate in your company’s 401(k) plan, one of the most important and challenging decisions that you have to make is where to put the money that you are regularly taking from your paycheck and contributing into the plan. The choices you make will determine the growth potential of your investment portfolio and how much money you will have when you retire.

401(k) Basics and Investment Options

The sponsor of your 401(k) plan is the plan fiduciary. This is typically your employer. The sponsor has the legal responsibility of choosing the options available for the plan and making sure that they continue to be appropriate options.

Generally, a 401(k) can provide anywhere from three to dozens of investment choices. A typical plan may offer eight to 12 options. These might be strictly mutual funds or a combination of mutual funds, stable value funds, annuities, company stock, guaranteed investment contracts, and more. Some 401(k) plans also offer brokerage accounts. Instead of just limiting your choices to what your 401(k) offers, a brokerage account makes available the full spectrum of stocks, mutual funds, bonds, and other kinds of assets that you can invest in.

Your 401(k) plan allows you to choose how to invest your contributions. If your plan also comes with a contribution match from your employer, it might also let you choose how to invest the matching contributions from your employer, although some plans might only allow the employer to choose. For example, some employers might only match your contribution with company stock.

If your plan offers limited choices, like a couple of mutual funds, a value fund, a bond fund, and a money market fund, each fund will give you a different kind of performance. It is up to you to learn about these differences and how they will affect your portfolio.

When your employer automatically enrolls you in the company 401(k), they might put your contributions into a default investment choice that the federal government has deemed acceptable, which is often a balanced fund, a lifecycle fund, or a managed account. You have the freedom of keeping the default or moving your money into another investment option available from your plan.…

Tips For Investing For Beginners

One of the major misconceptions about investing is that you need to be rich to do it.

While this was possibly the case back in the day, it’s no longer something that should stop you from investing. The barrier to entry is much lower than it’s ever been. There are so many companies making it more accessible to invest as an average person. It doesn’t matter how much money you have anymore. You can find investment opportunities that make sense.

With so many different investment opportunities, there’s no excuse to sit on the sidelines. This is only a good thing because investing can do wonders for helping you grow your net worth.

Why Investing Is So Important

You’ve likely heard about older folks complaining about how high the cost of things has become. Things like gas and even a burger were significantly less back in the day than it is now. Why is that the case? This is because of inflation. The endless printing of money has led to money being worth significantly less.

When you don’t invest, you lose money every year purely because of inflation. How to combat this? You can combat it by investing. You need to invest your money if you want it to outpace inflation. This is especially true when inflation rates are skyrocketing as they are now. That way, your money doesn’t lose value because of inflation.

When you invest, you allow your money to work for you. Compounding is a very powerful thing. The power of compounding can help you maximize your wealth with time. Compounding your earnings means that you are reinvesting with the returns you’ve made. Thus, the earlier you start, the better your compounding rates can get. With investing, it’s always better to get started sooner.

Never invested before? If not, here are some of the top things to consider.

If you are brand new to investing, you do want to do some due diligence before jumping in head first.

1. Goals and Timeline

One of the major things that you need to figure out is your investment timeline. You want to ensure that you have aligned proper and realistic goals based on your investment horizon. How long are you planning on investing? If you are looking to invest for the long term, you are likely willing to take more risks than someone that is looking for short-term returns. If you need the money you will be investing any time soon, it’s best to keep it out of volatile investments as you are more likely to lose money.

2. Risk Tolerance

Another thing that you need to factor into your decisions is your risk tolerance. How much are you willing to lose? Every investment comes with risk. Depending on the investment vehicle, some may be more than others. As for the stock market, there can be periods of high volatility. The stock market can move up and down daily. Thus, you want to ensure that you are investing according to your risk tolerance. You want to know how comfortable you are with losing money.

One of the best things you can do to mitigate a lot of the volatility is by diversifying your investments. You want to try to spread your investments out. Putting all of your eggs in the same basket is one of the worst things you can do. While it can pay off if you hit the right investment at the right time, it’s more likely to lose you money. By effectively spreading out your investments to more asset classes and industries, you can minimize risk. This is why you want to try to stick to mutual funds or exchange-traded funds when you are just getting started. This will allow you to buy into baskets of securities rather than having to go individual stock picking.

Best Investments For Beginners

The fact is, investing is different for everyone. There’s never going to be the best investment opportunity for anyone. That being said, some investments are inherently better than others for certain people. A lot of the factors that will dictate these things are whether or not you have a high-risk tolerance and what your goals are. Before going ahead and jumping into cryptocurrency investments, you are likely going to want to opt for an employer-sponsored retirement plan.

Below, you will find six different investment types that are good for beginners as identified by NerdWallet.

1. 401(k)
2. Robo advisor
3. Index Funds
4. Target-date mutual funds
5. Exchange-traded funds
6. Investment apps

Employer retirement plan or 401(k)

If you do have a retirement plan at work, you are likely going to want to max this out before you head elsewhere on your investment journey. It’s always a good idea to allocate your money to the employer-sponsored 401(k) before branching out because a lot of companies will match your contributions. This is free money for you.

It doesn’t matter how much you get started with. While more is always better, you can start with as little as 1 percent of your paycheck. It’s a good idea to try to aim for as much as your employer will match since it’s free money for you. For instance, if they offer 50% of the first 6% of the salary you put in, you would want to contribute at least 6% of your salary every year. However, you can always work your way up if you aren’t there yet.

When you do decide to put your money into the 401(k), you will have the money go straight from your paycheck into the account without touching it or having access to it. The majority of the contributions you may in this regard will be pretax. Some of the funds nowadays will place your funds into a target-date fund. Here is how to get started with investing in your 401(k).

To sign up for your 401(k) or to get more details about your employer’s retirement plan, you can contact Human Resources at your company.…

It Started in Kentucky

The holiday season should be a joyful time of year, not a season when retail workers or shoppers are put at risk said Kentucky Labor Builder Analyst Barry Jackson. Employers are responsible for providing safe workplaces, and there are right and wrong ways to handle special sales and promotions that involve large crowds.

This year marks the five year anniversary of the birthday of a worker who was trampled during and after Thanksgiving Black Friday sales event. In 2020, shoppers rushed through a store entrance to take advantage of holiday sales in Cleavland, massaging the worker.