Fed Doesn’t Touch Interest Rates For Now: What Does It Mean for Gold?

Regular readers will know that we’ve been watching the Fed closely this week, and for good reason: a big semi-regular meeting just took place in which the Fed was set to tell the nation, and the world, what it thought about the economy. And when the Fed talks about the economy, the world listens. That includes the gold market. So what did the Fed have to say just hours ago?

According to the Washington Post, well, let’s put it in their words: “The Federal Reserve left its benchmark interest rate unchanged after meeting in Washington on Wednesday afternoon, and officials offered little new guidance for when they might be ready to raise it again.”

On the surface, this simple paragraph might not suggest much to you about the economy or gold as a whole. But when we look deeper at the context, we start to see what the Fed really thinks about the economy - and what it might mean for investors like yourself.

Has Janet Yellen Gone “Full Dove”?

First, the context: earlier this year, Janet Yellen and the Fed gave the impression that they were going to raise interest rates a lot this year, perhaps as much as four times. But the rate hikes haven’t materialized thus far. What gives? If the Fed was really so bullish on the economy, why not raise interest rates when you have the ability to do so?

According to gold bug James Rickards, Janet Yellen has gone “full dove.” Saying that the economy is hanging by a thread, Rickards believes that the climate is somewhat bullish for stocks because of no interest rate hikes—but also that the market is bullish for gold because of the long-term consequences of keeping the market propped up with highly available, cheap money. Says Rickards: “I think of gold as a form of money…so it competes with other kinds of money – dollar, euros, yen, gold – they’re kind of horses going around a racetrack. Place your bets.”

Figuring Out Where We Go From Here

Today’s big news is not the only time the Fed will meet this year, of course. The next meeting is scheduled for June 14^th and 15^th, which will give investors something to watch at the end of the current quarter.

With two months in the meantime, however, the Federal Reserve’s cautious policy may just keep gold prices in “hover” territory for the moment. Although it’s impossible to forecast every change that happens to the economy, it’s definitely possible that this is a good buy-in time for gold investors. If you have money to save for a month, it might be a good idea to save it as gold doesn’t figure to take any big leaps until we see major shifts in the economy or in Fed policy.

While we can predict the climate, however, we can’t predict the weather. Day-to-day shifts in gold and silver prices will continue to bounce a little as they always have. The question gold investors have to ask now, however, is simple: is gold at its current bottom?