Commerzbank: Gold Remains Underpinned By 'Dovish' Fed
Comex April gold has climbed as high as $1,235.50 an ounce, its strongest level in two weeks, as traders continue to factor in a not-so-hawkish U.S. Federal Open Market Committee, says Commerzbank. The Fed hiked interest rates by 25 basis points last week, but Fed commentary was not seen as moving ahead the pace of future hikes. Since, the euro has gained ground against the U.S. dollar, with gold reclaiming some of the losses from the run-up to the FOMC meeting. “Gold is finding support from a weaker U.S. dollar and falling bond yields,” Commerzbank says. “The dovish outlook painted by Fed Chair (Janet) Yellen at the press conference following last Wednesday’s Fed meeting is clearly still having an impact. This is likely to lure a number of speculative financial investors back into gold after this group of investors massively reduced their net-long positions in the run-up to the FOMC meeting, thereby contributing to the slide that saw the price dip for a time to below $1,200 per troy ounce.” As of 7:46 a.m. EDT, Comex April gold was $1.50 higher to $1,231.70 an ounce.
By Allen Sykora of Kitco News; firstname.lastname@example.org
BBH: Market Has Doubts About FOMC Aggressiveness
Monday March 20, 2017 08:08
Many market participants appear to have doubts that the Federal Open Market Committee will increase U.S. interest rates as aggressively as the Fed’s so-called dot plot, says Brown Brothers Harriman. Fed officials recently sounded a more upbeat tone about the U.S. economy, but this may have been mostly an attempt to ensure that last week’s 25-basis-point rate hike was not a surprise, BBH says. “The FOMC statement and the forecasts simply confirmed the pace of normalization that had been previously signaled,” BBH says. “Moreover, the Federal Reserve has been unable to rebuild its credibility in the sense that investors still doubt that the central bank will deliver the rate hikes that it thinks will be appropriate. If investors took seriously that the Federal Reserve would hike rates five more times by the end of next year, the two-year note would not be yielding around 1.30%.” Since last week’s FOMC meeting, the market downgraded the chances of a follow-up hike in June, BBH says. “Judging by the Fed funds futures strip, about one in nine think the Fed will not hike again,” BBH says. “About a third thinks there may be one more hike, and one-third accepts the dots that indicate two hikes may be appropriate before the end of the year.”