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Mitsubishi: Gold Market To Scrutinize Powell Testimony This Week

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Gold may well take its next cue from congressional testimony this week by Federal Reserve Chair Jerome Powell, said Mitsubishi. In recent weeks, dovish Fed comments suggesting a rate cut have weighed on Treasury yields, making non-yielding assets like gold more attractive to investors. Dollar weakness also set in, helping the metal. “If the Fed ends up delaying the much-anticipated interest-rate cut later this month, in part to show its political independence from the White House, yields could rally and put downwards pressure on gold,” Mitsubishi said. “Further clues on the future direction of the Fed may come in Chairman Jay Powell’s congressional testimony on Wednesday and Thursday, as well as Wednesday’s Fed minutes.”

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

 

RBC’s Gero: Gold Has Enough Supportive Influences To Bounce From Sell-Off

Monday July 08, 2019 09:57

Gold has bounced from Friday’s post-jobs sell-off, when a 224,000 rise in nonfarm payrolls left market participants thinking the Federal Reserve may not be as aggressive cutting interest rates as previously thought, said George Gero, managing director with RBC Wealth Management. As of 8:43 a.m. EDT, Comex August gold was $6.80 higher to $1,406.90 an ounce. Gero commented that “with all the global worries of [an] economic pullback, political worries, Middle East problems, U.S. politics, Brexit and euro-zone worries, there is enough to urge buyers for gold to step up when large event-driven selling occurs,” Gero said.

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

 

BBH: Look For ‘Pushback’ By Fed Chair Powell

Monday July 08, 2019 09:02

Federal Open Market Committee policymakers may have created themselves a conundrum by signaling they will cut interest rates, only to see a strong U.S. jobs report on Friday, so policymakers may now push back to avoid the appearance of too much dovishness, said Brown Brothers Harriman. One of the key events this week is Wednesday-Thursday congressional testimony on monetary policy Powell. “Unfortunately, the Fed has painted itself into a metaphorical corner and seems to have committed to cut rates at the July 31 FOMC meeting,” BBH said. “WIRP shows a 100% certainty of a 25-bp [25-basis-point] cut, though the odds of a 50 bp cut then have moved close to zero.  Looking further out, the Fed funds futures strip is starting to pare back its easing expectations.” Minutes of the last FOMC meeting will be released Wednesday. “The Fed delivered a dovish pivot then with its statement and dot-plots,” BBH said. “However, we think markets took the message too dovishly and so Fed officials have been pushing back against this perception.” Now, Powell is due to report on monetary policy Wednesday and Thursday.  “We believe he will continue this pushback,” BBH said, adding that there will be numerous other Fed speakers this week as well.

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

 

Bannockburn: Markets Have Already ‘Done A Lot Of The Lifting’ For Fed

Monday July 08, 2019 09:02

The financial markets have already “done a lot of the lifting” for a Federal Reserve that was expected to cut interest rates, said Marc Chandler, chief market strategist with Bannockburn Global Forex, LLC. Fed policymakers had appeared to be leaning toward a rate cut, but then came a strong U.S. employment report on Friday showing 224,000 nonfarm jobs were created in June. Chandler suggests the Fed “should declare victory” by achieving price stability with full employment in a record-long expansion cycle, but is unlikely to take the credit during his an appearance before Congress this week.  It might be too late to persuade the market that it [the Fed] will not cut rates now, but Powell can lean against the idea that it will cut rates 75 bp [75 basis points] this year by emphasizing the still robust expansion (hard data: jobs and auto sales), strong financial conditions (that many think is frothy) and perhaps couching a cut in terms of ‘insurance,’” Chandler said. "Besides, the market has already done a lot of the lifting, while the Fed has been patient.  The 10-year note yield has fallen nearly 65 bp this year, and the two-year yield has fallen a little more than 60 bp. The Fed has already signaled the end of its tightening cycle to much effect.”

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