How To Play The Fed’s Rate Hike Bluff – Jim GrantBy Sarah Benali of Kitco News
Wednesday September 07, 2016 10:37
(Kitco News) -The Fed is bluffing, and no matter what happens with interest rates, it might be best for investors to stick with gold, this according to one widely known Fed critic and Wall Street pundit.
“I think that [the Federal Reserve] missed their mark. They should have raised rates by now,” Jim Grant, publisher of popular newsletter Grant’s Interest Rate Observer, told Kitco News.
And, as markets continue to be stuck in what appears to be monetary-policy limbo, Grant said he thinks “the solution for investors lies in gold.”
The yellow metal has gotten a boost recently as the likelihood of a U.S. rate hike has fallen. After the release of weak labor data last week, markets are only pricing in a 15% chance of a hike in September. Meanwhile, gold futures have risen almost $50 since last week’s lows, with December Comex gold futures last at $1,349.40 an ounce, down 0.34% on the day.
However, despite the seeming relationship between gold prices and tightening expectations, Grant argued that the yellow metal will not be driven by the Fed’s next policy move. Instead, “it’s the revelation that we’re walking – or running – down the wrong path, and that we must regroup and formulate a monetary policy that’s based upon a lasting standard of value.”
Current central bank policies will either “end in tears” or “laughter,” he continued, depending on how investors position themselves; and, according to Grant, gold is the safest bet.
“I think a bet on gold, to me, is actually an investment in monetary disorder. It’s not a hedge against it because we have monetary disorder,” he said.
“I think what us, gold bugs are waiting for is the spreading perception that we have monetary disorder.”