By continuing to navigate the unexplored waters of the investor world and focusing primarily on the exploitation of various trigger points that could lead to the next higher wave in gold, I would like to draw your attention to a rare development that has taken place. last week. As the United States attempts to combat the economic shock of the virus through various monetary policy measures, it experiences a dangerous strategy that has only been seen before in Europe and Japan, involving negative interest rates. . Looking at a chart of intraday price action in the gold futures of June from May 7, one can see a higher explosive movement when this phenomenon occurred.
At that time, the 2-year-old T-Note triggered a new break in a more “organized” trading session rather than what we saw on March 16. The 2-year yield also reached the closing low yield record in September 2011, when it reached 0.157%. Simultaneously, the Fed Fund futures contracts that are used to bet on central bank policy have indicated that the Fed could lower rates below ZERO.
From a business perspective, we have used several strategies to try to take advantage of the long-term price appreciation expected in the precious metals and other financial markets. If you are not familiar with strategies involving futures or options, we here at Blue Line Futures are here to help. You can sign up for more information on our trade alert program here GET TRADE ALERTS!
Now you have to wonder why a country would want negative interest rates?
Simply put, negative interest rates mean that the depositor is paying money, to save his money, which is a reversal of the normal rules. Just like you and I maintain a savings account at local banks, these banks hold their unused cash surplus at central banks like the Federal Reserve, the ECB or the BOJ. Under normal circumstances, these banks receive a small interest rate in return. However, with negative rates, central banks charge fees, and as part of this process, banks will be deterred from saving and will start lending more, thereby stimulating economic growth across the system. The only problem is that no economic growth occurs due to the closure, which means that negative rates could stay. This in turn will trigger the next wave of safe asset purchases as we saw last Thursday due to temporary “cracks” in the system. Like a dam, once too many cracks continue to form, the dam eventually breaks and nothing can stop what happens next.
From a business perspective, we have used several strategies to try to take advantage of the expected long-term price appreciation in the precious metal markets. If you are not familiar with strategies involving futures or options, at Blue Line Futures, we are here to help.
Remember that many factors can affect the direction of the metal markets, so be sure to stay up to date on developments by signing up for a two-week free trial of Blue Line Futures Morning Express research reports by clicking at the link here: Blue Line Express two-week free trial
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