WHY YELLEN’S FIRST BAZOOKA SHOT DIDN’T HURT GOLD $ASHR $DUST $EPI $FXI $GC_f $GDX $GDXJ $GLD $INDA $JDST $JNUG $NUGT $SLV

Federal Reserve Chairwoman Janet Yellen finally fired a shot against gold. She missed.

This was not the central bank’s latest interest-rate increase but a statement indicating a series of rapid rate increases. This was the first time since the financial crisis that the Fed was definitive about raising interest rates quickly.

Gold is a complex instrument that’s affected by several cross currents at any given time from all over the world. One mistake I often see some American investors make is they still think gold is mostly driven by the developments in the U.S.

In reality, gold these days is more influenced by India (ETFs of interest are the Wisdom Tree India Earnings Fund EPI,  and iShares MSCI India INDA,) and China (ETFs of interest include Deutsche X-trackers Harvest CSI 300 Index ASHR,  and iShares China Large-Cap FXI, ). I will discuss two of those factors related to the Fed; discussing all factors would take a book. For stocks and bonds, there are many smart, objective analysts. Unfortunately that is not the case in gold. Gold analysts are either permabulls or permabears.

These four charts tell the story:

Gold futures

Spider Gold Trust ETF GLD.

• Continuously compounded rate of change for the Consumer Price Index for all urban consumers, excluding food and energy.

One-month London Interbank Offered Rate (LIBOR), five-year forward inflation expectation rate and 10-year Treasury constant maturity rate.

Now we will discuss what these charts mean for the short-term and the long-term…Read more at MarketWatch

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