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Showing posts with label Federal Open Market Committee. Show all posts
Showing posts with label Federal Open Market Committee. Show all posts

Monday, 17 July 2017

Dovish Fed Comments positive for Gold

It’s quite strange that 10 days back the key influential factor that pulled gold prices down was responsible for the rise in gold prices in the past 5 days. Yes rate hike!!!!.

The precious jobs reports brought mixed sentiments for gold traders as there wasn’t really anything in this number which was going to put the brakes or fasten an interest rate hike.

But what played positive for gold was the statement realized by Fed Chairman, Janet Yellen post the data released on Friday.



The surge in gold prices came after a Friday report on consumer prices showed that inflation in June came in flat, a sign that consumer prices had trouble sustaining its upward momentum. A weaker-than-expected reading for June’s retail sales, which fell 0.2%, also signal led weakness. Economists polled by Market Watch had forecast a 0.1% increase. Market participants said the lack of spending from U.S. shoppers made it difficult to envision inflation approaching the Fed’s 2% target.

Gold prices on Friday marked the highest finish of the month and their first weekly rise since early June, as data on retail sales and inflation stoked concerns that the pace of economic growth may not merit lifting U.S. interest rates again in 2017.

U.S. consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished prospects of a third interest rate increase from the Federal Reserve this year.

The U.S. data bolstered expectations that the U.S. Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs. Some had been expecting another rate hike in 2017, however Fed Chair Janet Yellen's comments to the U.S. Congress this week was more dovish than originally anticipated.

Activity was muted ahead of a speech by US Federal Reserve Chair Janet Yellen later in the day which could give clues on the Fed's attitude towards inflation, and on when the US central bank will start reducing its $4.5-trillion balance sheet. That would likely push up bond yields, boosting the opportunity cost of holding bullion, and pushing gold lower.

But, in a testimony to the Congress, Federal Reserve Chairman Janet Yellen had signal led a gradual approach to future rate hikes, which pushed down the dollar and boosted the appeal of the precious metal.

The disappointing U.S. retail sales and inflation data has now seen the odds of another rate hike fall below 50% this year which  has further boosted the appeal of low- and non interest-bearing assets on a relative basis, hence the  market witnessed  breakdown in [the U.S. dollar/Japanese yen] and breakout in gold.

The latest economic data may be viewed as providing insufficient support for the Fed to lift interest rates at least once more in 2017 and shrink its $4.5 trillion balance sheet—an act that can also serve to lift rates and tighten economic conditions.

The next big thing for traders is the upcoming ECB monetary policy  meeting to be held on July 20 in Frankfurt and that certainly has an ability to bring another episode of taper tantrum. 

Monday, 5 December 2016

The Most Awaited Fed Meet Of The Year Keeps Markets Alert

Gold had rebounded somewhat last week although it remained below its psychologically important level of $1,200 per oz, suggesting that sentiment has not materially improved.

Gold came off its earlier lows but remained weak during Friday morning trading on December 2 – the near-certainty of a US interest-rate rise this month and an exodus of ETF investors put downward pressure on the market.


The spot gold price was seen trading at $1,176.45/1,176.65 per oz, up $3.35 on Thursday’s close. The metal fell on Thursday to its cheapest since February this year at $1,160.80 per oz.

Market was mainly focused on the US jobs reports, numbers of which would be an important deciding factor for the rate hike. The report was expected to show that 177,000 new non-farming jobs were added in November and unemployment rate forecasted at 4.9%.
Once the number Swere out gold came under pressure. Let’s have a look at the important data released-

  • On Thursday, US final manufacturing PMI in November bested economic consensus at 54.1 – 53.9 was called for. 
  • ISM manufacturing prices and PMI for November both topped projections at 54.5 and 53.2, respectively.
  • October construction spending, however, came in at 0.5% month-on-month, a touch below the 0.6% prediction, while weekly unemployment claims were at 268,000 last week, which was above consensus of 252,000.
  • On Friday non-farm payroll numbers showed that the USA added 178,000 jobs in November, against earlier expectations of around 165,000 and from October’s figure of just 161,000. In addition, unemployment dropped to 4.6% and wages climbed by 2.5%.


The recent spate of positive data is expected to produce higher rates when the US Federal Open Market Committee (FOMC) meets on December 13-14 – market participants see a 95% chance of a rate hike during the meeting, according to the CME FedWatch Tool.

The Asian physical market has picked up a little thanks to favorable seasonality and a fall in domestic prices. This should limit the downward pressure on international gold prices

This week, gold looks a little stronger because macro drivers have become slightly more favorable for precious metals from a weaker dollar and lower US real rates.
The gold price glided lower during Monday December 5 trading as its earlier push higher failed to hold and it slipped into negative territory.

The yellow metal had found support from its safe haven status after Italian Prime Minister Matteo Renzi was defeated in Sunday’s referendum.

The US Federal Open Market Committee (FOMC) will meet on December 14 – many participants expect an interest-rate rise to be announced, particularly after a run of positive data from the USA.

As of now, gold remains vulnerable ahead of the Fed meeting on December 13-14. Any stronger-than-expected US data is likely to raise the probability that the Fed lifts rates soon, pushing the dollar and US real rates higher, and in turn exerting downward pressure on the gold price.