Will the Fed hike?

We’re now the-thirds of the way through the second quarter, and GDPNow, which is measured by the Federal Reserve Bank of Atlanta, shows a GDP growth of only 1.3%, versus a 3.2% growth in the first quarter.

If the second quarter ends with a GDP number anywhere near 1.3%, the Fed can be expected to lower interest rates, after having posted four increases in 2018.  This is what the gold market is anticipating, lower interest rates that will make owning gold less costly (the interest that is foregone by owning gold).

Frankly, it may be what the stock market is anticipating, but for a different reason.

Often, lower interest rates increase interest in stocks but not at stock market tops and at the end of economic recoveries.  This recovery is now 119 months long and may end up being the longest on record, unless GDPNow is accurate, in which case it will still be right up there with the 1991-2001 recovery, which was 120 months.

Ominously though, this is one of the weakest economic recoveries ever.  The concept of zero interest and even negative rates is being bantered about.  Some German bonds already carry negative interest rates.

Fed rate hikes historically have been followed by economic recessions, and that may be what stocks are forecasting, an economic recession.  Economic recessions and stock market declines go hand-in-hand.  Rising gold markets and declining stock markets also go hand-in-hand.

I see exciting times ahead for the gold and silver markets.