Wednesday, July 20, 2016

We could see negative interest rates in USA

What hurt gold up until this year was the widespread consensus that interest rates were heading a lot higher, that the Fed was going to normalize monetary policy and that its balance sheet was going to shrink, that the Federal Reserve was actually going to become a seller of US Treasuries. Now, I’ve known all along that wasn’t going to happen.

In fact, the Fed hasn’t sold a Treasury at all. The balance sheet continues to grow as they reinvest all of their interest and maturing principle. But I believe now people are starting to realize that all the anticipated rate hikes are never going to materialize – that the Fed’s tightening cycle is already over.

The next move for the Fed is to cut rates, not to raise them again. I think we might actually go negative this time. I think QE4 is going to be bigger than QE 1, 2, and 3 combined. And so I think gold is not only going to retest the highs from 2011 when it was close to $1,900, but it’s going to surpass those highs and move into the much higher territory.