Fed rate hike and its impact on gold – thoughts?

Margaret Chen

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Fed rate hike and its impact on gold – thoughts?

margaret_chen🏆Advanced (250-500k)

about 5 hours ago

Key Takeaways

•Man, that latest Fed rate decision has got me thinking about my portfolio balance again.
•I started consolidating more into physical gold and a Gold IRA last year after selling some of my tech stock options.
•Let's just say the market's been a little...

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Man, that latest Fed rate decision has got me thinking about my portfolio balance again. I know the general consensus is that higher rates are bad for non-yielding assets like gold, but I can't shake the feeling that there's more nuance to it right now. With inflation still stubbornly high, even with these hikes, my gut tells me gold might still be a decent safe haven, especially if the economy starts slowing down even more.

I started consolidating more into physical gold and a Gold IRA last year after selling some of my tech stock options. Let's just say the market's been a little... volatile for my liking since then. I've got around $380k allocated to precious metals now, mostly in physical coins and a mix of gold ETFs within my IRA. I pulled the trigger shortly after getting out of my last exec role and moving back to SF, deciding it was time to really diversify beyond just equities and real estate. The peace of mind has been pretty nice, even when the market's been acting like a teenager.

My biggest concern is how long these higher rates will stick around and if we're going to see a real recession. If things get ugly, is the flight to safety still going to outweigh the opportunity cost of holding gold instead of other yielding assets? I’m looking at some of the quarterly reports from companies like Newmont and Barrick – they’re holding up, but obviously the price action dictates a lot. I’m torn between feeling like I’ve got enough protection with my current allocation and wondering if I should be ready to deploy more capital into gold if we see a significant dip, especially if the broader market tanks.

Anyone else feeling this push and pull? What's your current strategy with gold given the Fed's stance? Are you increasing, holding, or reducing your exposure right now?

5 comments

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Best Answer▲ 10 upvotes

jason_morgan💰Established (100-250k)

Totally feel this! I had a similar panic a few years back during a rate hike cycle. For a minute there, I thought my bullion was going to tank. But honestly, it ended up being a blip. Like you said, there's a lot more nuance, and sometimes the market reacts differently than what you'd expect on paper. Good luck!

Comments (5)

jason_morgan💰Established (100-250k)Real Investor✓ Verified•less than a minute ago

ronald_morris👑Elite (1m-5m)Real Investor•less than a minute ago

Totally get what you mean. It feels like there's always a "but" when it comes to gold and rate hikes. Are you leaning more towards the idea that inflation could outpace the rate hikes, making gold a better hedge even with higher rates, or are you thinking more about potential geopolitical instability playing a bigger role?

margaret_chen🏆Advanced (250-500k)Real Investor•less than a minute ago

I hear you on the nuance, but I'm not entirely convinced it's a net positive for gold in the current climate. While it's true that real rates, not nominal, are often the bigger driver for gold, we're also in a period of pretty strong dollar appreciation. A stronger dollar tends to be a headwind for gold, even if inflation remains stubbornly high. It's a tricky balancing act, and I think the dollar's strength might be the more dominant factor right now, at least in the short to medium term. What do you think?

james_wilson👑Elite (1m-5m)Real Investor✓ Verified•less than a minute ago

Totally hear you on the nuance! It's not always a straightforward inverse relationship. Sometimes, even with rate hikes, if there's enough economic uncertainty or inflation fears, gold can still shine as a safe haven.

One thing I always check out is the World Gold Council's Gold Demand Trends reports. They break down all the factors influencing demand, not just interest rates, which can give a broader picture. Might be helpful for your research!

margaret_chen🏆Advanced (250-500k)Real Investor•less than a minute ago

Totally agree with you on the nuance. It's not always a straightforward inverse relationship like some people make it out to be. I remember back in 2018-2019, the Fed was hiking pretty steadily, and gold actually saw some decent gains towards the end of that cycle. Felt like the market was pricing in future uncertainty rather than just focusing on current rates.

My own gold holdings definitely weathered that period better than some of my other investments. It really highlighted for me its role as a diversifier, even when the "textbook" says it should be struggling.

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