U.S. Fed's Interest Rate Deja Vu

You might recall that the US Fed made noises throughout 2015 about interest rate 'liftoff', resulting in an initial 25-basis point rise in late 2015. It told markets to expect 3-4 interest rate hikes during 2016 - it's now September and we've not seen the first. Markets have become accustomed to a central bank that talks tough, but does not follow through. It has become used to the next set of excuses to leave interest rates unchanged. Last night it was the release of 'unexpectedly weak' U.S. manufacturing data that raised further doubts about the economy's strength - and likelihood of a rate rise. The takeaway from all of this is that if the US economy is as robust as the Fed pretends it is, why the lingering hesitancy around a measly 25-basis point rate rise? The attached chart shows how gold priced in all currencies is benefiting from the worldwide low-interest rate environment. Given that the US dollar has strengthened against a number of currencies this year, gold’s performance when denominated in other currencies has been better still.