Fed Might Surprise Markets And Not Move In June - Peter Hug
The U.S. Federal Reserve could shock markets come June by not raising interest rates at its upcoming monetary policy meeting, in return greatly boosting gold, this according to Kitco’s global trading director Peter Hug.
“Most of the analysts believe a June rate hike is definitely on the table. I am not in that camp,” Hug told Kitco News in an interview. “There’s been some weak data recently, with the housing market and auto sales, that might give the Fed pause, especially given what’s going on with Trump administration’s issues with the FBI investigation.”
Right now this opinion goes against market consensus, which projects another rate hike come June 14. CME Group's FedWatch tool is currently showing market expectations for a June hike are 78.5%.
“The Fed may surprise the market and not move in June,” said Hug.
There is something in the market that continues to support gold prices, despite Dow rising and the dollar bouncing back.
Hug identified that element as “underlying angst.”
“The fact that the market is holding here gives me pause into shorting the market. If there was any weakness, I would be taking a shot at the $1,246 level to try to do a trade,” he noted.
The gold market is proving to be very resilient at the moment, which could suggest that a move higher to $1,265 and then to $1,300 is in the cards.
Spot gold on Kitco.com was steady during the opening hours of the Asian session, holding onto its previous gains and trading at $1,257.80 at the time of publication.
On Wednesday, the Fed released the minutes from its last policy meeting on May 2-3, which revealed that most members thought they should raise interest rates “soon,” as long as the economy continues to recover following a weak Q1.
“Members generally judged that it would be prudent to await additional evidence indicating that a recent slowdown in the pace of economic activity had been transitory before taking another step in removing accommodation,” according to the minutes.