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Fed Taper Call Boosts Gold Coin Prices

The U.S. Federal Reserve announced today that it will reduce its bond purchases by $10 billion per month after its governing members concluded that our nation’s economy is healthy enough to begin weaning it from the teat of quantitative easing. Though the move was more of a symbolic change than anything because of the small size of the reduction it effectively served as notice to the financial markets that it will soon be time to pay the piper.

Nevertheless, the news shocked U.S. stock indices and provided the gold coin market with a boost via the $8.90 increase in the gold spot price that was apparent in the mid-morning trading hours. The majority of those gains were pared in afternoon trading but the consensus among gold market analysts seems to be that it is only a matter of time before the Fed runs out of sleeves from which to pull tricks.

“Now that QE is on the decline the next thing to do is raise interest rates,” said Eric Winston, associate researcher at GoldCoin.net. “If you look at the rising interest rate cycle of 1960 to 1980 you can see how well gold coin investments performed, and we wouldn’t be surprised to see similar results this time around.”

Higher interest rates mean that corporations can no longer borrow money from the government for free. This could hamper construction, expansion and hiring, and stocks are historically more fragile when interest rates are on the rise. “In the last cycle stocks on average fell 3% for every 1% hike in the core interest rate,” said Winston. “On the other hand gold,” he added, “did over 1000% in the same time period and that’s why people like myself and our clients are buying gold.”

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