Which ETFs Will Benefit from a Rate Cut?

Another rate cut is looming in the near future, as the Federal Reserve kicked off a two-day meeting yesterday to discuss lowering the prime rate to 0.5%, giving gold ETFs a gleaming opportunity.

Any gains the U.S. dollar made may get shadowed by the drive by investors to go to the safe haven of gold, as the rate cut is expected, report Scott Jagow and Ashley Milne-Tyte for Marketplace. Given the circumstances, a rate cut would tend to push the gold prices up.

This historic two-day meeting would include a slash of the key interest rate to nearly 0%, and target special ways to help boost the economy, report Barbara Hagenbaugh and Sue Kirchhoff for USA Today. If the Fed doesn’t push its interest rate target to zero on Tuesday, many economists expect it to do so at its January meeting.

Other options include buying Treasury bonds to push down longer-term interest rates, or stepping up financial support for private consumers and business lenders, according to Federal Reserve Chairman Ben Bernanke.

The Federal Reserve will make its announcement tomorrow at 2:15 ET.

• SPDR Gold Shares (GLD): down 2% year-to-date

• PowerShares DB U.S. Dollar Index Bearish (UDN): down 6.6% year-to-date

Comments

[sbenard:]

Good choices. Also, since 70% of the US Dollar Index is related to the Euro, and the ECB has now signalled that their easing cycle is near an end, the Euro is once again rising firmly against the Dollar.
I am concern that US treasuries have risen too far and are now in bubble territory. I am prepared to short treasuries when the time and my indicators tell me the time is right.

2008 Dec 16 01:22 PM