Sunday , 23 April 2017


Interest Rates & Their Affect On Gold, Stocks, Monetary Policy & Economy

Most of the hundreds of financial articles posted every week are just “financial Interest-Ratesentertainment” – unfounded forecasts, fear mongering or cheerleading. That being said, there are a number of articles that are absolutely MUST READS if you want to become an informed investor and be in position to understand what is evolving in the financial environment and be in a position act accordingly. Here they are.

By Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!),  www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and the FREE Market Intelligence Report newsletter (register here; sample here)

Interest rates and their affect on:

A. The price of Gold

1. The Future Price of Gold and the 2% Factor

It is my contention that the price of gold rallies whenever the U.S. dollar’s real short-term interest rate is below 2%, falls whenever the real short rate is above 2%, and holds steady at the equilibrium rate of 2%. Let me explain. Read More »

2. What Do Current Low Interest Rates Mean For the Future Price of Gold?

Investors commonly assume that rising interest rates adversely impact the gold price, and vice versa. They believe that a rising interest rate environment is indicative of a strong economy, which is supposed to drive investors out of gold and into the stock market. They further assume that investors will want to exchange their gold, which has no yield, for stocks and bonds, both of which have yields and generate income but this intuition is unfounded. Let me explain why that is the case ans why, as such, gold investors shouldn’t fear rising interest rates. Read More »

3. What Affect Will Rising Interest Rates Have On Inflation & the Future Price of Gold?

Though the stock, bond and currency markets, at the moment, are preoccupied with the question of when the first interest-rate increase will happen, the real story lies in where interest rates are ultimately headed because that answer defines where stock, bond and currency prices are ultimately headed and the reality, dear reader, is that the Fed simply cannot — and will not — allow interest rates to crawl very high. Why is that you ask? Read on! Read More »

4. Future Gold Movement: Are Ups/Downs In Interest Rates the Best Predictor?

Many investors believe that the rise of the federal funds rate is detrimental for gold prices but, although this relationship may often hold, investors should be skeptical about this rule of thumb. This article explains why that is the case. Read More »

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B. Stock Market valuations

1. Is There A Direct Relationship Between Interest Rates & Stock Prices?

Events and conditions do not make investors behave in any particular way that can be identified as shown in this analysis of the supposed relationship between interest rates and stock prices. So much for the popular claim that “Interest rates drive stock prices”! Read More »

2. Interest Rates Play A MAJOR Role In the Behavior Of the Stock Market – Here’s Why

To understand how the stock market behaves it is imperative to realize that the stock market is overwhelmingly influenced by interest rates. It’s difficult to overstate this key fact. Interest rates are the bone and marrow of the stock market. More specifically, the stock market is ruled by long-term and short-term interest rates creating an overriding framework for what drives the market in which different sectors do better or worse at different points in the economic cycle. This article explains the behavior more fully. Read More »

3. What Affect, If Any, Will Rising Interest Rates Have On the Stock Market

The belief is that rising interest rates (as is currently occurring) are a sign that the economy is improving as activity is pushing borrowing rates higher. In turn, as investors, this bodes well for corporate profitability which supports the current valuations of stocks in the market. While this seems completely logical the question is whether, or not, this is really the case? Read More »

4. Don’t Worry About the Threat of Higher Interest Rates Hurting Stocks – Here’s Why

History clearly shows that stocks don’t fall during periods of rising interest rates. Sure, they might fall a little when a rate hike is announced – maybe for a week or so – but they usually bounce back quickly – and then they go higher. Read More »

5. Will Stocks & Bonds Get Killed When Interest Rates Rise?

Many investors are absolutely certain stocks and bonds are both going to get killed once the Fed finally does decide to raise rates. The historical record, however, doesn’t clearly back up that argument. Let me explain. Read More »

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C. Monetary Policy

1. Will Higher Interest Rates Result From Additional Tapering?

After a long period of very low interest rates following the global financial crisis the central banks of the U.S. and U.K. are planning to gradually tighten their easy monetary policies as their economies improve. When their benchmark interest rates go up, interest rates elsewhere will go up to so should we worry if and when global financial conditions tighten? Read More »

2. What Does Current Money Velocity Say About A Future Rise In Interest Rates?

With all of the things in the world to worry about, how much should we worry about a sudden sharp increase in UST yields? The short answer is not much and here is why. Read More »

3. Interest Rates NOT Rising Any Time Soon – Even With Fed Tapering. Here’s Why

Everyone and their mom is expecting long-term interest rates to rise now that the Fed is tapering its bond buying programs. I have a couple of problems with this line of thinking because, although it seems like reducing demand for a security (i.e. tapering QE) would result in a drop in price, when you really think about how quantitative easing works this makes no sense and, secondly, the market is telling us this makes no sense. Let me explain. Read More »

4. Don’t Fear End of QE or Beginning of Higher Interest Rates – Here’s Why

The Fed and the bond market are responding appropriately to declining risk aversion and a somewhat improved economic outlook. There is no reason to fear the end of QE or the beginning of higher short-term interest rates. Let me explain further. Read More »

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D. The Economy

1. Higher Interest Rates Will Come Once These 4 Economic Conditions Are Met

4 economic conditions need to be in place for interest rates to rise ahead of – and independent of – the Fed’s forward guidance. The economy met only one of those conditions to date but will likely meet all four by the end of the year…What follows is a status report on the four conditions. Read More »

2. Interest Rates Will Be LOW For the Rest Of Our Lives! Here’s Why

The argument that the past 10 years of low interest rates has just been an anomaly which will normalize to higher levels in the next couple of years is not going to unfold. Interest rates will be perpetually low for the rest of our lives! Here’s why. Read More »

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