Morning Report Thursday 17th March 2016
No rate rise in the US, is it time to buy gold stocks?
Good morning everyone - happy St Patricks Day too Overview Overnight the US Federal Reserve (Fed) backed off significantly from its previously intended rate increasing schedule. As expected there was no increase in rates but the surprise was the forecasted median interest rate at 0.875% by the end of 2016, a whopping (in relative terms) 0.5% lower than previously forecast. Interest rates under 1% for the largest, and arguably currently strongest, economy in the world by the end of 2016 is not a great sign for overall world economic strength. The Fed sighted concerns around global economic / financial developments as their reason for becoming more cautious around rates - sounds like China again. Lower rates are great for gold as it becomes more competitive against interest paying assets and especially against negative interest rates sweeping the world. Not surprisingly the decision was positive for US equities which have now rallied 12.3% over the last 6 weeks in a straight line - they are now only 5.3% below the all-time highs of 2015. A pullback feels way overdue but, as we have mentioned previously, fund managers are underweight equities which is likely to lend support short term.
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