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I'm detecting a pattern for the price of gold in 2017. When there's an interest rate hike, there's a weekly surge in gold prices.
U.S. Federal Reserve Chair Janet Yellen fulfilled the worst-kept secret in the world this week and instituted her third rate hike. Now, U.S. interest rates stand in the 0.75% to 1.00% range.
And what happened to gold prices? They leaped higher, just like they did after the last two rate hikes.
Traders and investors stepped up with both feet, "buying the news" after "selling the rumor." This was in line with what I said we should expect last week, as I thought the gold price correction had mostly run its course.
Editor's Note: For only the third time in 20 years, a metal more rare and more exotic than gold is about to make stock market history. And it's poised to make early investors a lot of money. Get the full story.
Gold's bounce back was actually quite impressive. But now we need to watch what happens to the precious metal in the next few days as the news starts to be digested by the market.
I think the gains over the last few days since the rate hike will hold and build higher, with the gold price rising 14% by the end of 2017.
We'll first analyze the price action of the past week, then look to two current political events that could influence prices in the coming months...
How the Interest Rate Hike Pushed Gold 2.1% Higher This Week
You can see from the four days leading up to the Fed rate hike that the $1,200 level was acting as a floor, as I had expected.
After closing on Friday, March 10, at $1,204, gold prices kicked off this week rising to $1,211. But sellers quickly took back control on Monday as the U.S. dollar bounced higher and dragged gold lower. The price of gold ended the day at $1,204 for no gain.
It was ongoing weakness on Tuesday, March 14, which was the first day of the FOMC meeting. The gold price opened at $1,204 and traded flat for most of the day before falling near the close. It settled 0.4% lower at $1,199.
Then on Wednesday, the price of gold surged higher after the 2 p.m. announcement that interest rates were raised. It closed at $1,220 and logged a 1.8% gain on the day.
If you've been long on gold - like the Money Morning members who've been following my updates on the price of gold in 2017 - then Wednesday's gold price action was a thing of beauty...
On Thursday, March 16, gold prices opened higher at $1,227. Despite an afternoon bounce in the dollar, gold still managed to settle at $1,225.50 for a 0.5% gain.
And the gold price today (Friday, March 17) is continuing those gains. As of 9:25 a.m., it's up 0.2% to $1,229. That puts gold on track for a weekly gain of 2.1%.
Remember that the jump in gold's price this past week was on the heels of a rate hike. That's supposed to be a headwind, and still gold moved higher, which is very bullish.
Of course, there was likely some "sell the rumor, buy the news" action, but still gold's been behaving well.
This rally in the face of rising rates could be indirectly attributed to these two ongoing political events that could help lift prices 14% by the end of the year...
2 Political Events That Could Raise the Price of Gold in 2017 by 14%
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.
