Gold is having a great time in the market after the Federal Reserve made the decision to keep interest rates the same. Today, we'll talk about why the Federal Reserve's decision is giving commodities a boost, what to expect moving forward, and how binary options traders can profit from the trends. So, let's get right to it…
Why The Federal Reserve's Decision To Keep Interest Rates Low Helps Commodities
Gold is a very interesting commodity in the sense that its price is both dependent on supply and demand and moved by the fact that it's a safe haven. With markets in the midst of turmoil, the safe haven side of gold is really starting to kick in. However, before the Federal Reserve's decision yesterday, the precious metal was reaching a bit of resistance. After all, if the Federal Reserve did make the decision to increase interest rates, it would have put pressure on the price of gold. The reasoning is simple…
The fact of the matter is that there are several different types of safe havens out there; one of which is treasury bonds. If the Federal Reserve did decide to increase its interest rate, the yield on treasury bonds would have went higher. As a result, it would have been hard for gold to pull investors looking for a safe haven away from the idea of purchasing treasury bonds. However, with the low rate, yields on treasury bonds are incredibly low at the moment; ultimately making gold an even more shiny metal in the eyes of those looking for a way to keep their money safe in the down market. As a result, we're seeing heavy inflows into gold. Rob Haworth, senior investment strategist for US Bank Wealth management had the following to say…
“No change in Fed rate target and little indication of a commitment to increase rates still this year is driving the dollar down and providing support for gold… Fed comments about global market volatility and global economic risks are also supporting, likely, safe-haven flows into gold.”
What We Can Expect To See Moving Forward
When it comes to gold, I believe that there's still room for the precious metal to move higher. The reality is that gold seems to be moving into safe haven mode based on the economic conditions we're seeing around the world; particularly in China and other emerging economies. While I would like to say that we are likely to see growth in these economies relatively soon, I simply don't see that to be the case; and there are several other experts that feel the same. In fact, I'm expecting for conditions to get worse before they get better. As a result, we're likely to see more investors looking toward safe havens; and gold is likely to be one of the most powerful safe havens considering the Federal Reserve's decision.
How Binary Options Traders Can Profit From The Trends
Ultimately, at this point, we are expecting to see gold rise more. Therefore, it's time to start looking for call options as a way to take advantage of the movements. Outside of gold, I'm expecting to see more turmoil in US markets. Therefore, you may want to start looking for put option opportunities in assets like the Dow Jones Industrial Average, S&P 500, NASDAQ, and even the dollar. Keep an eye on the latest financial news.
What Do You Think?
Where do you think gold is headed and why? Let us know in the comments below!
[Image Courtesy of Globe Views]