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Standard Chartered: FOMC-Led Cycle Lows In Gold Are Rising

Kitco News

Standard Chartered says the cycle lows, after U.S. Federal Open Market Committee rate hikes, are rising, with Fed policy to decide gold’s future direction. The past three Fed rate hikes have marked cycle lows for gold, and coupled with a likely softer physical floor in the coming weeks, support levels for the gold price have weakened, Standard says. “However, the cycle lows have risen after each of the past hikes,” Standard says. Wednesday’s 25-basis-point rate hike was expected, but weaker inflation and employment data have moderated market expectations for additional hikes, the bank continues. “The Fed continued to signal one additional hike for this year, but if the market starts pricing in the end to the current hiking cycle, this would remove a major headwind for gold and allow prices to breach the stubborn $1,300/oz threshold in a sustained move higher, in our view,” Standard says. “If not, while it appeared the floor for prices had risen, physical demand has now weakened.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

FXTM: ‘Disconnect’ Between Fed Signals, Market Expectations

Thursday June 15, 2017 08:16

There appears to be a “disconnect” between what financial markets think the Federal Open Market Committee will do and what policymakers indicated after a meeting Wednesday, says FXTM research analyst Lukman Otunuga. “Financial markets were caught completely off guard during late trading on Wednesday after the Federal Reserve adopted a firmly hawkish stance and even displayed some optimism over economic growth despite mounting concerns over weak inflation,” the analyst says. “The tone of caution investors were anticipating from the Fed was replaced by a strong determination to continue tightening in response to falling employment while accepting the prolonged periods of weak inflation this year.” However, although the hawkish Fed tone offered a temporary boost to the U.S. dollar, markets “have not bought into this newfound optimism” as expectations of another interest-rate increase in 2017 stands below 50%, Otunuga says. The analyst points out that FOMC members trimmed their medium estimate for inflation to 1.6% this year, so the central bank “may be in no rush to hike rates again in the coming months.” Otunuga also cites the soft U.S. retail sales and inflation data reported earlier Wednesday. “All in all, there seems to be a disconnect between what the markets anticipate and what the Fed is signaling, with investors needing more persuasion on the Federal Reserve’s ability to raise rates again,” Otunuga says.

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