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Fed Increases; Dollar Rises, Gold Swoons

Commentaries & Views

(Kitco News) - Weaker data on inflation and retail sales at yesterday’s open caused a spike in metals as traders assumed the Fed might hold off. But it was not to be and when Yellen bumped the Fed rate by a quarter point at 2 p.m., the expected swoon occurred, albeit from higher levels. Forward guidance remained somewhat muted, although Yellen still retained her bias towards higher inflation by 2018. It is unlikely the Fed will raise more than one more time in 2017 and likely that if policymakers do, it won’t happen until December. The dollar did receive some lift on the rate increase and this correlation, especially to the yen, will determine short-term direction for the metals. Gold is right at a key support level of $1,252 and a break here suggests further short-term weakness. The market requires increased physical demand, which has been absent in the North American theater, to generate some upside momentum.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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