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Connecting the dots – The Federal Reserve votes

Commentaries & Views

The entire precious metals complex moved higher today after the conclusion of December's FOMC meeting. The Federal Reserve concluded its final Federal Open Market Committee meeting for the year, and as many expected left interest rates unchanged for the remainder of 2019. However, information found within the Federal Reserve’s release of a statement which included projections for the next few years, including their “dot plot” laying out their anticipated monetary policy.

This projection indicated that the vast majority of voting members anticipate that in 2020 interest rates will remain unchanged from their current level. Only four participants anticipated a 25-basis point rise in interest rates, with the remaining 11 voting members acknowledging that the best course is to leave interest rates where they are.

While this strong support for stable interest rates is not extremely dovish, Chairman Jerome Powell in his press conference today indicated that they do not look at the “dot plot” for their monetary policy guidance, rather they look at the economic data to base decisions on.

However, their projections for 2021 do not indicate a unified stance from voting members. This projection indicates that only five members recommended that interest rates remain unchanged. Four members anticipate a hike of 25-basis points, five members projected a 50-basis points interest rate hike rise, with the remaining three projecting that 2021 will contain a rate hike of 75-basis points.

That being said gold as of 4:23 PM EST is currently up by $11.70, putting the most active February contract at $1479.80. Today’s gains are the result of a combination of dollar weakness and bullish market sentiment as traders bid the precious yellow metal higher.

Spot gold is currently trading up by $10.90 and fixed at $1474.90. According to the KGX in today’s gain of $10.90 of which $6.30 is directly attributable to dollar weakness, with the remaining $4.60 gain attributed to traders bullish sentiment.

There are two more important events that traders have now begun to focus on. First and foremost is the trade war between the United States and China and what decision President Trump will make on December 15, the deadline for rolling out an additional $165 billion in tariffs for Chinese imports. Secondly, market participants will be watching the election results in Britain, which will be held on Thursday. This could shed light on whether Britain will exit (Brexit) the European Union.

These two events could most certainly have a profound and major impact on upcoming gold pricing.

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Wishing you as always, good trading,

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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