Hawaii Six O - Gary Wagner
Gold Stages A Swift Recovery
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Last night, gold prices traded lower overseas. Moving to a two-week low Monday morning in European trading, gold dropped to $1,307.50. Concerns about the outcome of this month’s FOMC meeting, which begins tomorrow and concludes on Wednesday, was a significant contributing factor to the selloff.
The nervousness behind the lower pricing in gold was primarily based on the belief that the Fed will announce the first-rate hike of the year. The countdown to the FOMC meeting as of 3:51 PM Eastern standard time is at: 1 day, 19 hours, 9 minutes, and counting.
As reported by BusinessDay, a London publication, “The two-day Federal open market committee meeting begins on Tuesday, with the U.S. central bank expected to raise interest rates for the first time this year on Wednesday. With an increase of 25 basis points seen as a done deal, one key focus is whether Fed policymakers forecast four rate increases this year instead of the three projected at the December meeting.”
According to the CME’s FedWatch tool, there is a 94.4% probability that the Federal Reserve will announce a 25-basis point rate hike at the end of this month’s meeting on Wednesday. This is an increase of 1.4% from March 16 when the FedWatch tool predicted a 93% probability.
A Safe-Haven Mindset Returns As U.S. Equities Trade Dramatically Lower
Market sentiment, which had been favoring risk-on investments due to a robust U.S. equities markets, quickly shifted favoring the safe-haven asset class when stocks came under dramatic pressure in the U.S.
The Dow Jones Industrial Average traded over 400 points lower to an intraday low of 24,453 before recovering. Losing 1.35% in today’s trading, the Dow closed at 24,610.91, down 335 points on the day. Lower U.S. stocks pressured the U.S. dollar lower and were highly supportive of safe-haven assets, creating a risk-off environment and moving gold to higher ground.
Gold had a swift and decisive recovery with April futures closing up $4.10 at $1316.40, which is a gain of 3/10 of a percent on the day. The U.S. dollar weakness accounted for much of today’s gains. The U.S. dollar index lost about 4/10 of a percent in trading today, closing at 89.45, a loss of 34 points today.
Spot gold gained $2.80 on the day to close at $1,316.40. This gain was directly attributable to dollar weakness. While traders moved gold pricing $1.40 lower in trading, a weak U.S. dollar contributed a net gain of $4.20, resulting in gains of 2/10 of a percent.
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Wishing you as always, good trading,