LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

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

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

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
When Lights Go Off, What Does Gold Do?


 -- Published: Thursday, 6 December 2018 | Print  | Disqus 

Powell has recently came up with the metaphor of wandering in the darkness. Will golden sunshine brighten the dark?

 

I Am the Fed Chair and I Know Nothing

 

On November 14th, Powell discussed global perspectives in Dallas Fed with its President, Robert Kaplan. He characterized the Fed’s stance, providing an interesting analogy:

 

A non-economic example [of the approach adopted by the Fed] would be you’re walking through a room full of furniture and the lights go off. What do you do? You slow down. You stop, probably, and feel your way. So it’s not different with policy.

 

Has Powell just admitted that the most important central bank in the world is basically straying in the dark? That it is like a lost kid in a fog, rambling idly without a fixed direction or aim? Last year, Yellen described low US inflation as mystery. Now, Powell moved further and confessed that he knew nothing. It’s a bit disturbing, but maybe the Fed Chair is just a disciple of Socrates who understands that attaining wisdom is to admit own ignorance. Yeah, maybe.

 

Am I Dove, Now?

 

Jokes aside. Has Powell tilted toward the dovish camp? Well, he has definitely softened his tone recently. As we reported last week, Powell suggested that the federal funds rate might be closer to the neutral level that he thought previously.

 

However, we have wait for the economic projections – the FOMC members will update their rate forecasts in the so-called dot-plot at their meeting in December 18-19. As a reminder, the median forecast in September was for three increases of 25 basis points each in 2019. But the Committee was far from unanimity. The birds tweet that the voting members were actually evenly split among two, three and four hikes next year.

 

Will some hawks transform into doves? It’s possible, but not likely. What is more likely is that some hawks will transform into centrists. But even if all members who were voting for four hikes will start to opt for only three raises, the median number of proposed hikes will not change. Two more officials would have to argue for only two hikes to change the picture.

 

Will that happen? As Richard Clarida and Mary Dole add their dots for the first time, the plot may change, indeed. Trump exert some pressure on Powell & Company. The US housing market has recently slowed down, possibly in reaction to rising interest rates. The stock market tumbled again this week, with Dow Jones falling sharply (see the chart below), after the arrest of the CFO of Huawei. So, the Fed officials may soften their views.

 

Chart 1: Dow Jones over the last ten days.

http://www.goldseek.com/news/2018/12-6as.png

 

However, the macroeconomic picture still supports the hawkish case. Inflation is at the 2-percent target. And the recent Beige Book reported that wage growth tended to the higher side of a modest to moderate pace in most Fed’s districts. Rising wages could lead the Fed officials more worried about the future inflation. Moreover, the labor market is beyond several estimates of full employment and companies complain on the shortage of qualified workers. In such environment, the FOMC members may be not comfortable turning more dovish.

 

Implications for Gold

 

What does it all mean for the gold market? Well, it depends on what will emerge from the darkness through which Powell and his colleagues try to maneuver. We believe that the US economy will continue its expansion in 2019, so the Fed will not drop its policy of gradual tightening of monetary policy. We expect that the status quo will remain with us, so gold should stay within its sideway trend.

 

However, when it reaches its bottom, it could start to rally later next year, as the macroeconomic picture could become more friendly for the precious metals. Even when the Fed will hike interest rates three times in 2019, it will mean a slowdown in the pace of normalization. So, tightening is exhausting its potential. At the same time, fiscal accommodation should run low, which imply more neutral policy mix. It should mean somewhat less strong US dollar, which would support the yellow metal in the future. 

 

We will write more about our 2019 fundamental forecast for the gold market in the January edition of the Market Overview. After the FOMC meeting in December we will know much more. But one thing is already certain: when the dark falls, what you need is sunshine!

Thank you.

 

Arkadiusz Sieron

Sunshine Profits - Free Gold Analysis

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 


| Digg This Article
 -- Published: Thursday, 6 December 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 - 2019



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


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC 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, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.