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What is next for Gold when the Federal Reserve starts Raising Rates?

15 March 20126 comments Latest Market News

Just before the Great Global Credit Crisis hit the financial markets, rising inflation was the hot topic and so was Gold.

From super high oil prices to super high real estate, the Federal Reserve had consistently raised interest rates from the year 2004 through 2007, to slow the robust economy.

Interest rates rose from 1% to 5%, a 400% increase. During that timeline, gold prices had risen $300, a whopping increase of 75%! Why? One factor was that gold was being bought as a hedge against inflation. How does it act as a hedge? Gold is also considered a commodity. It has an industrial use. Such as a semi-conductor application that are used in chips. That’s right! All those chips that are in personal computers, compliances, music players, cars, trucks, cell phones, pretty much anything that is digital today.

Therefore, how is gold used as a Hedge against inflation? In order to beat inflation you must join it. In other words, buy the leading industrial commodities that are part of the inflation make-up, like gold.
The under 1% interest rates these last few years over in the US and UK has been creating consistent growth for manufacturers, jobs and housing throughout the last few quarters. In fact, the Federal Reserve has now acknowledged as much to the public and the financial markets are now starting to factor no additional quantitative easing and that interest rates will start to rise in 2013.

Individual investors and Fund Managers will probably start to shift from the QE era to the inflation one, for which then should propel gold prices to its record highs. One cannot ignore when inflation comes out of hibernation what that sleeping giant’s impact can have on gold can be bigger than the quantitative easing one.

Learn how you can capitalize on this event and the additional industry events that can propel gold prices higher. For more information, receive our  Gold Investment Guide by filing out the form.

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