Why You Shouldn’t Fear Rising Interest Rates

Larry Edelson

I’ve got to hand it to the majority of pundits out there. They just never learn or think for themselves. They keep dishing out the same nonsense, over and over again.

For instance, the notion that rising interest rates will kill off equity market gains, particularly in the United States … or choke off a real estate recovery … or kill the gold market for good — is a myth. Period.

It might be true if interest rates were at record highs and well above the rate of inflation. But they are not. Interest rates are at or coming off of historic record lows in many parts of the world, and there is no inflation to speak of. There is the opposite, deflation.

That’s important to understand. As rates rise from historic low levels — many investors will run for cover. But the only market that rising interest rates will truly hurt is the value of sovereign bonds.

Let’s consider real estate. Why would rising mortgage rates — at this point in the economic cycle and recovery — be bad for property prices?

They won’t be bad. For the simple reason that as mortgage rates rise, all the pent-up demand for property will come out of the woodwork and start buying — in anticipation of further increases in the cost of borrowed funds.

That’s just the property markets. Rising interest rates are also going to ultimately prove positive for equity markets. While equity markets in the U.S. and Europe remain vulnerable to a short-term pullback, over the long haul, rising rates will be a bullish factor.

Over the long haul, rising interest rates will be a bullish factor for equity markets.

It means the velocity of money turnover is improving, and it means increasing demand for credit — all of which are bullish fundamental forces for equities.

Ditto for commodities. The notion that gold will simply rollover and die and that a new bull-market leg higher is impossible with rising interest rates, is nonsense.

Just consider the last big bull market in gold, from 1973 to 1980, when interest rates were soaring, as was the price of gold and most commodities.

Sure, inflation was roaring higher then, too. But that doesn’t negate the fact that gold soared with higher interest rates. Moreover, there have been numerous other times throughout history when gold rose along with rising interest rates.

That said, right now, most commodities still have some work to do on the downside before they bottom. But bottom they will — and they will rise again — along with rising interest rates.

Indeed, as I pen this column, gold and silver remain on target for a potential major low soon to be made or confirmed. Ditto for mining shares and platinum and palladium.

Given that we may be so close to a major low in both time and price, it’s only natural to ask if one should start aggressively buying now.

My answer: No. Wait until I give you the final major buy signal. That’s what I am personally waiting for before I load up for my family.

Best wishes,

Larry

P.S. Supercycle Trader is about to release a NEW bundle of recommendations! Click here to activate your membership in the wealth-building service that led members to 13 winners in 14 completed trades last month.

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

Comments 42

Paul December 9, 2015

Hi Larry I subscribe to RWR and you told us that gold followed by silver would be bottoming either finally or an intermediate bottom on November 25th. Now your saying they havnt.. am really confused. What gives ??

John T December 9, 2015

Paul They haven't bottomed because Larry really doesn't know, Keeps changing dates.

Damien December 9, 2015

Larry does think they might have bottomed already. He now is looking for confirmation. Either a retest of the 1035 level and holding support or the year end close above 1073.90. Or a breakout altogether.

Linda A. December 9, 2015

Gold did close above 1086. Does that mean a bottom confirmation?

jrj90620 December 9, 2015

Larry's predicted the bottom in precious metals prices,many times over the years.So,when they finally bottom,he can say he predicted it.

Eli December 9, 2015

Larry, I subscribe to the RWR and you mentioned that you were going to provide sources you recommend to purchase gold. Are you still on track to do that this week?

John C December 9, 2015

Hoping he will recommend US Gold and Silver advisors. I have made my purchases there. The process was seamless.

Paul December 9, 2015

You think the housing market will recover in a rising interest rate period? I though housing was a function of jobs. Isn't the middle class being killed off? Don't we have a record # on welfare? Hasn't the median income dropped 10% during this administration. Don't programs like NAFTA CAFTA and TPP hurt jobs in this Country? With 3rd world countries having to borrow in $ they have to spend more of their currency to purchase dollars to pay back principal and interest. Won't these countries go belly up unless we have a currency reset?

JEAN FLEMING December 9, 2015

I AGREE WITH PAUL

Hi Larry December 9, 2015

I have not joined your services YET but must admit out of all I read and I read & read all day for the better part of the last 14 yrs you certainly know your stuff . Jim Cramer has nothing on you . Honestly

Peter December 9, 2015

Why would rising interest rates hurt sovereign bonds. It seems like it would help to provide a better return to investors, albeit a higher debt service to the issuer. thanks

august December 9, 2015

gold closed above 1073.90------an important level per your recent report------what do you think now?

orvin December 9, 2015

don't bet against. the $ it was 180 degrees off. maybe what goes around etc.

Siggy L December 9, 2015

Thanks Larry, While a subscriber to RWR, I started Supercycle Trader with less than $25,000. Have since triple my money and ready to follow your recommendations into 2016.

Jake the snake December 9, 2015

Larry is that you?

Ed December 9, 2015

100% Larry.

Concussedx11 December 9, 2015

I'm with august above. While I understand that the markets dictate price to us & not vice versa, I too would like to know what you believe the close (well) above $1073.90 means for the prospect of gold's bottoming. Does that successful test raise the bottoming forecast above the afore mentioned $975.00 level or does it simply extend the bottoming process out & into the first quarter of next year.

Dale December 9, 2015

Please name the 13 that was winners only one loser last month. Bee with you several months & I can't say that. Trying to figure out what I'm missing Dale Foster

franklin December 9, 2015

Dale - these guru/pundits have little ways to twist and maneuver their record, always in their favor, of course. "Figures don't lie, but liars can figure." If you pay good money to follow these soothsayers, you're on the slippery slope.

Paul December 9, 2015

Ha ha ... me too Dale and I suspect many others.

Marky December 9, 2015

His Gold and Silver trader was rebranded into the Super Cycle trader - same crap by the sounds of it. Larry is using a mystical computer that crunches 10 kabillion megabytes of data per millisecond to forecast markets - in protoplasmic super duper way. Just read Armstrong Economics you'll find striking similarities only difference is it's free!

orvin December 9, 2015

had to leave humor! bet forex with $. DRAGGI LEFT ME WITH Mini cycle. 70 years ago, at the blacksmith shop----the wagon wheel ran threw IT !!!!!.

Peter December 9, 2015

You are correct in most things Larry, Sufffice to say it is impossible to absolutely time and price the markets. Can you recommend Thai gold ??? I live in Thailand too and have a stash. Should I internationalize my gold holdings ??

Ronald Stolpman December 9, 2015

Larry, you have talked for a long time about a sharp but temporary pullback in equities, but the market continues to rise, albeit in a series of jerky moves. Do you still think there will be a pullback?

franklin December 9, 2015

Ronald, the fact that Larry's fortune telling hasn't come true, shows his crystal ball is like a stopped clock. If he was wrong, why ask him again for advice?

Dan December 9, 2015

What's with you? If you expect Larry or anyone else to exactly predict the future, you're in for a sad awakening! Take some responsibility man! Sounds like you've no business even following the market... much less investing in it!

Nino Raciti December 9, 2015

Where are the answers to these above good questions?

Dan December 9, 2015

Here ya go Dale: Nov 18th - EUO160115C25, FXY160318P78, UUP160318C25 EUO, SIL UUP (all winners) Nov 12th - USO hit the stop loss Nov 5th - pair of DZZ, pair of EUO, UUP160318C25, EUO160115C25, UUP (all winners)

$1,000 gold December 9, 2015

gold excels during secular bear markets in stocks - no other time (and those good times for gold are far and few between). those good times for gold happen at the top of the interest rate cycle, (like in 1980), and the bottom, (like 2011). we're exiting a secular bear market in stocks and entering a secular bull market in stocks. this means we're exiting a secular bull market in gold and entering a secular bear market in gold. say goodbye to gold, say hello to stocks. gold will go to sleep for the next couple decades and sit on the shelf and collect dust, while stocks climb to 31,000 or even higher on the dow, like larry has been saying for some time now.

$1,000 gold December 9, 2015

gold ... fugetaboutit.

$1,000 gold December 9, 2015

people are buying cars like crazy and driving everywhere. the demand for money will allow banks to raise rates on loans, so the fed will need to keep the spread in line by raising the funds rate. it’s coming. we’ve finally turned the corner guys. we’ve got to start thinking in terms of inflation.

remi December 9, 2015

Larry, why no comment on the Euro this week? It made a major reversal. Is it loing lasting?

Robert P December 9, 2015

Larry, at least some of the comments after your posts lately sound as if they are manufactured by the guys at Weiss and company.....real classy act!

Marky December 9, 2015

lol my thinking exactly. Bad actors these guys are!

Geo December 9, 2015

Gold was supposed to go off a cliff in Dec. It will be a "doozy". While the long term trend is intact he keeps proving that in the short term he's clueless but he does have a newsletter to get out and needs to keep the troops entertained somehow.

Robert P December 9, 2015

Like the one above from "Hi Larry...I have not joined your services YET but must admit out of all I read and I read & read all day for the better part of the last 14 yrs you certainly know your stuff . Jim Cramer has nothing on you . Honestly" and the one from "Siggy L...Thanks Larry, While a subscriber to RWR, I started Supercycle Trader with less than $25,000. Have since triple my money and ready to follow your recommendations into 2016." ...These are REAL readers, posting REAL comments?? ...and then you cut off any further ability to comment by truly real readers...? Nice try!

Robert P December 9, 2015

I certainly don't blame you for trying not to get "beat up" in the comments section by the guys who say they want to cut off parts of your anatomy, BUT...... ...you must have calluses on your hands from patting yourself on the back! Hahaha

Linda A. December 9, 2015

Does your Super Cycle's recommendations concentrate on option trading? I am not too comfortable to trade options. I am a senior.

John December 9, 2015

Ever notice how Larry NEVER replies to your comments ' You are wasting your time

Tim Lewis December 9, 2015

I was very disappointed in your posting today. The last time your wrote you said you saw two scenarios for gold--(1) we are still in a downdraft if it closed below $1,035 or we were finally starting to go up if it closed above $1,073.90. It closed above the latter number on Friday which produced great expectations about what you were going to say in your next regular Wednesday post. Then you gave us virtually nothing.

Ben December 9, 2015

Hi Larry, I'm a new subscriber, have some UUP shares, and was doing good until Euro shot up. (over 4 cents in one hit last week). We all thought it (Euro) would go down against the dollar, any good ideas on this? Should I bail out? thank you.

jrj90620 December 9, 2015

Actual inflation,not govt's phony numbers,is closer to 5-6%.So,interest rates are very negative.If the Fed raises rates slower than inflation rises,then they will stay very negative.This should be positive for real assets,in the long run and negative for Dollars and Dollar promises,like bonds.