Monthly Archives: May 2015

Possible Mid-Term Scenario

The fed (Yellen) recently announced the stock market has high valuations which some are taking as a indication the fed could likely move forward with its rate hikes later this year.

When the fed increases, initially it is likely to cause both the stock market and gold (including metal miners) go down.  The increased rates will make it more expensive for businesses to borrow money, therefore lowering their profits.  An increase in rates is also associated with hampering inflation; hence gold will suffer.

However, if the fed increases rates and after the initial decrease of both the stock market and gold occur, should the market rebound strongly it would be a sign of overpowering inflation; for if a rate increase doesn’t hurt (gigantic) businesses, then that means they are able to charge more for their products, hence creating inflation.

With all the money printing that has happened, inflation has to rear its ugly head at some point.  It could be years away, maybe not until the next big yet-to-be-forseen boom (or bubble) happens.  Its my suggestion that you think long term (10 years) and get yourself positioned now.  For it will quietly happen and if you don’t start positioning yourself in the near term you’ll be chasing the trend in the long term, potentially missing out on the biggest gains which happen early.

So watch for this potential scenario to play out.  Look for the rate increase and both the market and gold to head down.  If you don’t believe gold (and related investments) are already at staggering lows, this scenario would be something to put on your radar for your long term buying opportunity in gold and gold related investments (ie gold miners).