Gold is a “screaming buy” today. But not for the reason you think.

From Dr. Steve Sjuggerud, editor, True Wealth: 

Simple logic would tell you to sell gold when the Federal Reserve raises rates… not to buy it.

But the truth is, based on history, the price of gold actually soars in the 12 months before the Federal Reserve raises interest rates.

Chances are the Fed will raise interest rates in 2015… so we are in that 12-month period right now. (I explained why rates will likely rise next year in this recent DailyWealth.)

I know today’s message will surprise you… But we have a fantastic opportunity to buy gold today, before the Fed hikes rates.

Let me explain…

Logically, gold should do well when interest rates are near zero – not when the Fed is raising interest rates. But history shows that’s not actually the case…

You see, when rates are near zero, there’s no penalty for owning gold (which pays you no interest). When interest rates rise, on the other hand, you’re giving up a potential yield on your money in order to hold gold. That yield should discourage gold demand and hurt gold prices.

The problem is, markets don’t always work based on simple logic. And in the case of gold, rising rates actually gives us a fantastic opportunity…

We sized up over 40 years’ worth of data. We looked at all the times when the U.S. moved from periods of low or falling rates into periods of rising rates.

History shows that the biggest gains in gold come roughly one year BEFORE the Fed raises rates.

The numbers get a little crazy. But they’re absolutely true. The table below has the full details…

 

Gold Returns Starting 1-Year Before Rates Rise
 
6-Month
1-Year
Gains
18.7%
20.0%
All Periods
4.2%
8.7%

 

As you can see, buying gold one year before the Fed raises rates leads to massive gains.

One year before rates rise, gold increases 20%, based on history… crushing the “buy-and-hold” one-year gain. And most of the gains come in the first six months, as the table shows.

In short, we want to own gold before and as the Fed raises rates.

The Fed will almost certainly raise interest rates in 2015. So we want to own gold today.

I know this will seem illogical and backward to many investors. Rising rates “should” hurt gold. But history tells a different story.

With rising rates on the way next year, gold is in a prime situation to soar.

The simplest way to invest is through the SPDR Gold Shares (GLD). Based on history, this simple fund could be good for 20% gains over the next year. Don’t miss out.

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