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Gold Reacts To A Perceived Hawkish Fed

Commentaries & Views

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(Kitco News) - Gold sold off heavily yesterday as Fed Chair Powell’s testimony in front of Congress was seen as more hawkish than traders expected. Powell’s statement that the Fed would continue to normalize rates throughout 2018 on the back of a robust U.S. economy and rising inflation expectations created a reversal in the dollar and a subsequent drop in the metals. The dollar is expected to gain strength during this cycle as the EU and Japan continue to remain accommodative and yield spreads for the dollar widen against the euro and yen. We continue to believe the Fed is posturing and will remain very tentative in moving rates higher with the risks associated to the equity and housing markets. Gold managed to stay above the $1,317 level at the close and remains tentatively constructive but the 1.22 euro/dollar level  should be watched. A breakdown here would suggest further short-term dollar strength and move gold to a possible $1,307 trade.

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 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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