Make Kitco Your Homepage

Commerzbank: Post-Fed Dollar Weakness Propels Gold Prices Higher

Kitco News

Gold prices hit a fresh eight-month high in the wake of dovishly construed Federal Reserve communications Wednesday, says Commerzbank. The metal drew fuel from a weak U.S. dollar that “depreciated significantly” following a Fed meeting, analysts say. As of 8:25 a.m. EST, spot gold was up $3.80 to $1,323.20 an ounce and peaked at $1,324.35, its strongest level since May. “Unexpectedly, the U.S. Federal Reserve yesterday signaled an end to its rate-hike cycle for the time being and has switched to a neutral approach,” Commerzbank says. “What is more, it hinted that a more flexible – that is to say quicker – process of balance-sheet normalization would be followed.” Further hikes will be data-dependent, Commerzbank says. “If the Fed rate hike cycle really has come to an end now, the USD weakness anticipated by our FX colleagues could come sooner than previously thought. If so, gold would presumably also rise more quickly and more sharply.”

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

 

TDS: Gold Needs Extra Impetus To Reach $1,360/Oz

Thursday January 31, 2019 08:33

The outcome of Wednesday’s Federal Open Market Committee meeting was supportive for gold but another impetus may be needed for the market to climb to $1,360 an ounce, says TD Securities. Fed Chair Jerome Powell surprised the market with a “fairly dovish” press conference in which signaled that the case for further gradual rate hikes has decreased, while the normalization of the balance sheet will happen "sooner and with a larger balance sheet than in previous estimates.” TDs says it now sees the balance sheet run-off concluding in June and only one rate hike in 2019. “This offers firm support for gold in the low $1,300s, but we think further weakness across equities, U.S. economic data, and the USD [dollar] will be needed before a true breakout toward the next CTA [Commodity Trading Adviser] trigger of $1360/oz.”

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

 

BMO: Fed Adopts ‘More Passive Rather Than Proactive Stance’

Thursday January 31, 2019 08:33

The Federal Open Market Committee struck a “dovish tone” and “passive” stance on monetary policy Wednesday, signaling that the case for further rate hikes has weakened in recent weeks, says BMO Capital Markets. This arguably may conclude the Fed’s three-year tightening cycle, BMO says. “Holding rates steady, the Fed eschewed its previous rhetoric of ‘further gradual increases,’ stating that it would be ‘patient’ before making any further moves – a break away from previous guidance of pause-then-hike towards a wait-and-see approach,” BMO says. “Signaling for two rate increases this year was reaffirmed; however, with the recent market volatility and cautious economic outlook, the Fed seems to be adopting a more passive rather than proactive stance to monetary policy in 2019.”

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

 

FXTM: Central-Bank Purchases May Add Fuel To Gold Rally

Thursday January 31, 2019 08:33

Gold prices could get an additional boost from central-bank purchases, says Hussein Sayed, chief market strategist at FXTM. In its most recent report on demand trends, the World Gold Council says that central banks added 651.5 tonnes to official gold reserves in 2018, which was the second-highest annual total on record. “If this trend is expected to continue in 2019, the chances of retesting the 2016 peak of $1,375 is highly likely in the coming two months,” Sayed says.

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

 

BBH: Treasury Yields Fall In Aftermath Of Fed Meeting

Thursday January 31, 2019 08:33

U.S. Treasury yields have fallen in the wake of an “extremely dovish hold” on interest rates by the Federal Open Market Committee on Wednesday, says Brown Brothers Harriman. “We were shocked at how dovish [Fed Chair Jerome] Powell was, especially since equity markets had calmed from the Fed’s ‘patience’ and ‘flexibility’ message since the December FOMC meeting,” BBH says. “U.S. rates have responded accordingly.” As of an early-morning BBH report, the two-year yield had fallen back below 2.50% to levels not seen since Jan. 7, while the 10-year yield had fallen to 2.66%. The implied yield on the January 2020 Fed Funds futures contract has fallen to 2.38%, also the lowest since Jan. 7, BBH says. “That means the market is back to pricing in a potential rate cut this year,” analysts add.

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.