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Majority Of Kitco Readers Don’t Expect The Fed To Hike Rates In 2015

By Kitco News
Wednesday January 28, 2015 10:07 AM

(Kitco News) - Although markets continue to expect the Federal Reserve to eventually hike interest rates, either in June or September, Kitco readers are not convinced that a rate hike will be coming in 2015.

Since the December Federal Open Market Committee (FOMC) meeting, Kitco News’ reader’s survey has been asking visitors when they think the Fed could start hiking rates. Of the 695 participants, an overwhelming majority, 526 people, or 76%, responded that the U.S. economy can’t afford higher interest rates.

Only 102 participants, or 15%, said that September would be the start of the normalization process. The remaining 67 participants, or 10%, expected that the Fed would surprise markets with a March rate hike.

Most economist and market analysts agree that Wednesday’s monetary policy statement is not going to shed any new light on the exact timing of central bank’s liftoff to normalize interest rates. However, some analysts have noted that gold prices have managed to hold above key support levels as expectations for rate hikes continue to be pushed out until later in the year.

Sean Lusk, director of commercial hedging with Walsh Trading, said that he is not expecting any major surprises in Wednesday’s monetary policy statement, but added that the central bank committee must be disappointed with the recent economic data.

He added that if the data continues to remain weak, the Fed could be forced to delay rate hikes, until at least the fourth quarter, which would be good for gold.

In a recent interview Adrian Day, president and chief executive officer of Adrian Day Asset Management, said that in the long-term, gold should continue to perform well as markets increasingly push out rate hike expectations.

“I have been on record for a while saying that whatever interest rate increase we do get will be less and later than what people are expecting,” he said.    

Bill Baruch, senior commodity broker at iiTrader agreed that there are growing doubts as to the timing of the first rate hike, but gold will struggle to hold gains above $1,300 as higher interest rates are only a matter of time.

“The timing of a rate hike isn’t as important to the gold trade as the fact that the FOMC will likely raise rates sometime in the next nine to fourteen months; we believe that this fact alone will make any rally in the metal unsustainable,” he said.

By Neils Christensen of Kitco News; nchristensen@kitco.com
Follow Neils Christensen @neils_C




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 precious metal products, 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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