Opinion with Peter Hug
Fed Increases; Dollar Rises, Gold Swoons
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
(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.