Tomorrow Will Be A Big Day For Gold And Silver

Wednesday, April 27, 2016

The values of gold and silver have climbed and fallen this year more than a roller coaster. However, I believe that tomorrow is going to be a spectacular day for the precious metals investing community. That's because at the end of the day today, the Federal Reserve will announce the results of its FOMC meeting…and chances are that these results will produce incredibly strong gains in the values of precious metals. Today, we'll talk about what the FOMC meeting is; why it will likely produce big gains for precious metals, and what we can expect to see in the precious metals market moving forward.

What Is The FOMC Meeting?

The Federal Reserve holds a meeting that generally happens once per month called the FOMC meeting. It is at this meeting that the Federal Reserve makes its decisions with regard to changes to monetary policies in the United States. This makes it a very important meeting these days, perhaps more important than ever before.

The reality is that at last December FOMC meeting, the Federal Reserve made the decision to increase its record low-interest rate for the first time in several years. During the announcement that the interest rate would be increased, the Fed also announced that it would be increasing its interest rate between two and four times over the next year. However, they have failed to act as of yet.

Nonetheless, while most signs are pointing to the Fed keeping its interest rate the same, there's still a chance that the Fed could make a statement at the end of the day today by announcing yet another rate increase. As a result of this possibility, we're seeing slight declines in the values of precious metals today.

What Does Interest Rate Have To Do With Precious Metals

The Federal Reserve's interest rate isn't just any interest rate, it is the interest rate that dictates the value of the United States dollar. You see, since the gold standard was taken out of play, the values associated with currencies have been largely dependent on changes to interest associated with those currencies. When interest is increased, the value of the currency associated with the interest climbs. Adversely, decreases in interest cause decreases in currency values.

The bottom line is that gold and silver are both priced using the United States dollar. So, if the Federal Reserve does increase its interest rate, the USD will climb, meaning that gold and silver will become more expensive in nations outside of the United States. This will lead to decreasing demand and a decline in the value of the precious metals. However, based on current economic conditions, it doesn't seem as though the Fed will be able to increase its interest rate. In this case, this would be a signal of poor economic movement in the United States, leading to declines in the USD and making gold and silver less expensive in other nations. As a result, demand for precious metals will climb in value.

What We Can Expect Moving Forward

I've said it time and time again recently. I believe that 2016 is going to be a big year for precious metals. As global economic conditions remain uncertain, market conditions remain concerning, oil continues to slide, and geopolitical conditions continue to be worrisome at best, the values of precious metals are likely to keep climbing. 

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.