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Interest rates are an important factor in the gold price forecast, so it's a good time to get an update on the yellow metal since the Sept. 17 Fed meeting pushed a rate hike down the road…
Fed Chairwoman Janet Yellen failed to give clear guidance on when rates will be raised, except to say the first increase could occur at any future meeting. And she still expects it will happen in 2015.
Interest rates have been near zero since 2008. The Fed hasn't seen the "right" conditions to justify even a minor initial rate hike.
Rates affect gold investing because gold, which offers no yield, competes with interest from bonds and dividends from stocks.
Here's what the yellow metal's behavior leading up to and right after the Fed decision tells us about where gold prices are headed next…
Gold Price Struggles to Break Out of Long Correction
At the start of 2015, gold rallied from about $1,200 to $1,300. Many investors hoped the correction dating back to 2011 might finally be over.
But that rally fizzled by mid-January, with gold giving up those gains to touch $1,150 in March.
Gold mostly went sideways until June and then weakened to just below $1,100 in July.
When markets experienced a strong correction in late August, gold kicked into gear and moved higher – then backed off once again.
Interestingly, its retest of $1,100 this time remained above that level in what now looks like a double bottom.
And while it's still too early to tell, that action may have finally marked the end of gold's long correction.
Now if we look more specifically at Friday, Sept. 11, price action in gold stocks was especially intriguing…
Gold Stocks' Big Movement Ahead of Fed News
The Market Vectors Gold Miners ETF (NYSE Arca: GDX), which is a good proxy for major gold miners and royalty companies, touched its lowest price ever of $12.62 on Sept. 11. However, in a strong intraday reversal, GDX ended up on the day to gain 0.7%, 4.75% higher than that day's low.
Let's look at how the SPDR S&P 500 ETF (NYSE Arca: SPY), gold, and gold stocks performed from Sept. 11 until the Fed made its announcement.
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.