Opinion with Peter Hug
Fed Raises; Gold Swoons, Gold Rises; Pattern Repeats
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - Gold traded as we expected after the Fed raised rates yesterday -- first a swoon on the announcement and then a pop. This has been the pattern for the last three rate hikes. Although the message from the Fed was hawkish, indicating further rate hikes this year, traders ignored the statement and began focusing again on global issues, specifically the looming trade wars. There is a consensus building that an acceleration of trade friction will be negative for global growth, which may make the Fed's hawkish statement a moot point. The focus will be on President Trump's decision on moving forward with Chinese tariffs, due to take effect tomorrow. On this point, we are less worried, at least while talks with North Korea remain ongoing. The U.S. needs China, if a North Korea deal has any chance of success, and the president may defer implementation of the actions against Chinese goods. The ECB has left rates unchanged and indicated that asset purchases will end by year-end. Watch the China story. If Trump backs off, gold may run into selling. The $1,297 level indicates support and a break above the 200-day moving average at $1,307 will generate the momentum for a sustainable rally.