Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek Radio: Gerald Celente and Bill Murphy, and Chris Waltzek
By: radio.GoldSeek.com

The Economy is Cracking Up. Are You?
By: David Haggith

How to Dodge the Debt Train
By: John Mauldin

THE INDIAN INVESTOR: The Major Wild Card In The Silver Market
By: Steve St. Angelo

Gold And Silver Futures Action Turning Positive
By: John Rubino

You Buy the Fear in Gold
By: Gary Tanashian

Gold Gets Clobbered Again
By: David Morgan

Gold Seeker Weekly Wrap-Up: Gold and Silver Fall Almost 1% and 2% on the Week
By: Chris Mullen, Gold Seeker Report

COT Gold, Silver and US Dollar Index Report - July 20, 2018
By: GoldSeek.com

The Deep State, Trump, and the World
By: Clive Maund

 
Search

GoldSeek Web

 
Please Introduce Yourself, Mr. Powell. Gold Awaits You


 -- Published: Tuesday, 20 March 2018 | Print  | Disqus 

The FOMC members will gather today for a two-day meeting. It will be the most important event this week, since Powell will chair the meeting for the first time. Gold investors want to get to know him better as the uncertainty makes them a bit nervous. What should we expect from the new Fed Chair?

 

First FOMC meeting under Powell as Chair

Do you remember your first bike ride? Or the first date Ė and kiss? People often fear doing something new. Itís normal. We are status quo creatures. We are afraid of changes. They are risky. Particularly in monetary policy. Indeed, we like technical innovations, but we prefer predictable and conservative banks, donít we?

 

The personal changes in the top positions at central banks are especially hazardous. Indeed, do you remember what Draghi did during his first meeting as the President of the ECB? He cut interest rates, reversing Trichetís monetary tightening. And do you remember the first decision of Kuroda as the Governor of the BoJ? He announced aggressive asset purchases under Qualitative and Quantitative Easing.

 

So itís understandable that the financial markets are a bit nervous ahead of the FOMC meeting. Will Powell hike? What will he say? Will he reveal a hawkish bias? These are the questions investors are asking right now. Letís try to answer to them.

 

Brace Yourselves, Hike is Coming

The Fed will hike. Itís almost certain. The market odds of such move are more than 94 percent. It implies that the lack of a hike would be significantly more disruptive than a hike at this state of market expectations. Powell will not risk upsetting the markets. As the move is practically fully priced in, gold prices shouldnít fall on that. Actually, they may increase afterwards, as investors often sell the rumor and buy the fact. What really matters are the new Fed forecasts and Powellís forward guidance. Will he signal that four rate hikes are likely this year?

 

Three of Four Hikes in 2018?

The market consensus is that the Fed will hike the federal funds rate three times this year. However, Powell expressed a lot of confidence in his recent testimony before Congress. As a reminder, he said that some previous headwinds became tailwinds. Hence, investors worry that Powell could accelerate the pace of Fedís tightening cycle, showing a hawkish bias, despite the fact that some of the recent data was disappointing (think about subdued consumer inflation in February). Some analysts even claim that the shift from Yellen to Powell caused the recent stock market turmoil.

 

Indeed, the recent strengthening of labor market conditions combined with fiscal stimulus and the more hawkish composition of the FOMC has raised the chances that the dot plot will show a quicker pace of policy tightening preferred at least by some members of the Committee.

 

But the Fed doesnít need to decisively signal the fourth hike now. We donít say that there will be only three hikes Ė what we are saying is that it would be reasonable for Fed to wait for more data, given the fact that the fourth hike would not come until the end of 2018. So why should the Fed risk its Ė not very high, by the way Ė credibility?

 

Conclusions

If history is any guide and the pattern established since December 2015 will hold, the price of gold should remain under pressure until the release of the FOMC statement and perhaps the immediate aftermath. However, after a while, the attention should return to political uncertainty about Washington trade protectionism and fiscal policy. It should allow gold prices to climb higher. Indeed, as the chart below shows, the price of gold fell ahead of the FOMC meeting and rallied soon after (the yellow rectangles mark the relevant periods) during the current Fed tightening cycle.

 

Chart 1: Gold prices (London P.M. Fix, in $) since November 2015.

http://www.goldseek.com/news/2018/3-20as.png

 

Surely, there is a risk that the Fedís forecast will be more aggressive, but the fears of a hawkish revolution may be a bit overblown. Hence, investors may fill ease after the FOMC meeting Ė gold should catch its breath then. One thing is certain: after Wednesday, we will know more about the new Fed Chair. Gold has waited long for this moment. Stay tuned!

Thank you.

 

Arkadiusz Sieron

Sunshine Profits - Free Gold Analysis

 


| Digg This Article
 -- Published: Tuesday, 20 March 2018 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2018



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.