Bitcoin dropped below $10,000 for a short time Wednesday (Jan. 17) as a selloff sparked by increased talk of government regulation spooked the market.
In the weeks leading up to the December Federal Reserve rate hike, the price of gold fell and most mainstream analysts were bearish on the yellow metal. After all, rising interest rates are bad for gold. right? But we took a contrarian position, saying the negative relationship between rising interest rates and the price of gold is really more of a “sell the rumor, buy the fact” phenomenon.
As it turns out, we were right. In the weeks since the Federal Open Market Committee nudged the interest rate up another 25 basis points on Dec. 13, gold has outperformed most other major assets.
The Federal Reserve released December’s FOMC meeting minutes this week, and the tone was decidedly more “hawkish,” leading most analysts to believe interest rate hikes and quantitative tightening will remain on track in the coming year.
As Bloomberg reported, “officials in December debated the risks to the US economic outlook, with some concerned about low inflation and others pointing to robust growth that was about to get a further boost from tax cuts.”
In fact, inflation was at the center of debate. But generally, the concern was that inflation expectations remain too low. In his latest podcast, Peter Schiff said this attitude shows just how clueless investors, and the general public are.
In analyzing trends, most people tend to focus on averages. But when it comes to stock and bond markets, the averages don’t really mean a whole lot. These markets spend most of their time far above or below the mean. This has led Dan Kurz of DK Analytics to say stock and bond markets are “reversion beyond the mean machines.”
In other words, when markets climb really high above the average, as they have in recent years, they eventually tend to crash to extreme lows far below the average.
Lost in the shadow of gold and cryptocurrency, silver quietly gained over 6% in 2017. Even so, the white metal was considered an underperformer. Gold was up better than 12% on the year. But with silver languishing a bit behind gold, there are strong indications that 2018 could prove to be a big year for the white metal.
In fact, according to an article in the Business Standard, mainstream investors have started betting big on silver in anticipation of a big price upswing in 2018.
On Dec. 31, 2016, the price of gold stood at 1,156.00. Today, it is knocking on the $1,300 mark. The yellow metal is on track to gain about 12% in 2017, its best year since 2010. Gold has made these gains despite a number headwinds that we would expect to put a significant drag on gold.
Here are seven major themes that have driven gold news over the past year.