Gold Resilient Amid Market Sentiment Reversal

This week the Federal Reserve addressed revisions to its current monetary policy in its attempt to reduce the current levels of inflation to an acceptable target. The statement released after the FOMC meeting, coupled with Chairman Powell’s press conference, resulted in extreme volatility in many financial sectors.

Market participants witnessed one of the strongest knee-jerk reactions and complete market sentiment reversal over 24 hours. The initial market sentiment was extremely short-lived as it was followed by a complete turnaround from the initial reaction the following trading day.

The release of the Federal Reserve’s FOMC statement, coupled with Chairman Powell’s press conference, resulted in a major rally in U.S. equities. The S&P 500 gained almost 3%, the largest daily gain in two years. Equities overall experienced the best Fed-day return since 2011. It significantly impacted gold, moving the precious yellow metal higher. Concurrently, the dollar had a significant decline losing almost 1%, and yields on U.S. Treasuries were also significantly declining. Continue reading "Gold Resilient Amid Market Sentiment Reversal"

Gold Bounces But Couldn't Hold Friday's Highs

June 2022 gold futures opened Friday morning at $1895.80, far above Thursday’s low of $1871. Trading to a high of $1921.30 and settled in New York up 1.1% at $1911.70. However, on Fridays, Globex trading remains open until 6 PM EDT before closing for the weekend. As of 5:10 EDT, gold has moved back below $1900 and is currently fixed at $1896.90, a net gain of $5.60 or 0.30% in after-hours trading.

Gold Futures Daily Chart

The tremendous price swings evident in gold over the last couple of days likely resulted from multiple factors influencing gold prices. Investors continue to focus on next week’s FOMC meeting. It is widely anticipated that the Fed will enact a .50 percent interest rate hike which will go into effect at the end of next week’s meeting. Concurrently it is widely believed that the Federal Reserve will begin to reduce its balance sheet assets over the next three years. Economists polled by Bloomberg news believe that the Federal Reserve will reduce its balance sheet from the current level of $8.8 trillion to $6.4 trillion by the conclusion of 2024. Continue reading "Gold Bounces But Couldn't Hold Friday's Highs"

Gold Declines As Fed Prepares To Fight Inflation

The Federal Reserve’s next FOMC meeting is just under two weeks away, and market participants are gaining insight from Chairman Powell and other Federal Reserve voting members. Recent statements by Chairman Powell have indicated a major shift in his position regarding inflation. Up until his most recent statements, he maintained that inflation levels had peaked, were transitory, and would begin to decline. However, he has been forced to reevaluate those assumptions based on the reality that the CPI is currently at 8.5% for March, and the PCE index came in at 6.4% in February. PCE numbers for March will be released on April 29.

Statements by all members of the Federal Reserve have intrinsically contained subtle changes in words used to describe their forward guidance; this was not the case this week when Chairman Powell addressed the issue of inflation head-on.

For the first time, Powell was forced to acknowledge that “it is appropriate to be moving a little more quickly... Our goal is to use our tools to get demand and supply back in synch…and do so without a slowdown that amounts to a recession... It is going to be very challenging.”

During the March FOMC meeting, the Federal Reserve began its process of interest rate normalization or “lift-off” by raising the Fed Funds rate from virtually zero (0% to .25%) by .25% taking interest rates to 25 – 50 basis points.

The most recent inflationary data indicates that Americans are experiencing the highest inflationary pressure since January 1982, which makes it almost certain Continue reading "Gold Declines As Fed Prepares To Fight Inflation"

Gold Has Repeated Bullish Pattern

Back in February, I shared with you an updated monthly chart of gold futures with a completed Cup & Handle pattern just ahead of a potential breakout above the preset trigger.

Most readers supported the ambitious target of $2,800 for that exact pattern. So let's check on the chart below and see how it plays out these days.

Monthly Gold Futures Chart

Indeed, the bullish impulse gathered enough power to break above the resistance that acted as a trigger for this pattern. The volume increased significantly, as it was required to overcome the barrier and confirm the breakout. The RSI has supported that rally as it turned north, either. Continue reading "Gold Has Repeated Bullish Pattern"

Global Inflation Prompts Action By Central Banks

Inflation is not limited to the United States. It is a global phenomenon prompting central banks worldwide to take action. Central banks worldwide are quickly moving to a more aggressive monetary policy in an attempt to stave off the spiraling international level of inflation. The president of the Federal Reserve Bank of New York, John Williams, spoke to Bloomberg Television saying that a .50% hike in interest rates is a ‘very reasonable option’ for May.

He also addressed the endgame and timeline to achieve interest rate normalization, saying, “We need to get to a more neutral or normal level of the fed funds rate, though whether that would be the end of the year or exactly when will depend on the data... The Fed should get “real” interest rates, nominal borrowing costs minus expected the inflation rate, back up to a more normal level by next year.” Continue reading "Global Inflation Prompts Action By Central Banks"