The gold price poked its nose just above unchanged on Tuesday morning, though it soon joined the rest of the precious metals slightly lower in early trading. Markets in the U.S. and abroad are expected to remain in a holding pattern today due to the start of the two-day March meeting of the FOMC. The moment to watch prices begin to move will be after 2 pm EST tomorrow.
Spot gold was virtually flat at $1,204/oz after the opening bell in New York while the silver price slipped about 0.2% to $16.90/oz. As for the Platinum Group Metals, the platinum price tracked with gold, only about 0.1% lower, though palladium languished more than 1% in the red.
As the much-anticipated Fed meeting kicks off today, there is a firm expectation that the committee will indeed raise its target interest rate by a quarter-percent, or 25 basis points. Even as consensus at the central bank has swung clearly into the direction of hiking rates, the Fed has still maintained that the pace of future rate increases will be fairly gradual.
This still could mean that the FOMC chooses to implement multiple increases of the federal funds rate by 25 bp this year. However, the current projection of four may be ambitious, given the Fed’s reluctance to move too quickly in 2015 and 2016.
At the conclusion of the March meeting tomorrow, a carefully worded statement will be released by the committee at 2 pm. Chair Yellen will then hold a press conference to explain the FOMC’s thinking to the press (read: the markets).
The press conference itself has become a bit of a signal about whether or not the Fed will act at a particular meeting. Whether one is scheduled or not gives everyone at least a preliminary indication about the chances of a rate hike: the Fed generally won’t change policy during a month in which it has no post-meeting press conference afterward. So the scheduling of a press conference doesn’t guarantee that rates are going up, but the absence of one would strongly suggest that no action will be taken.
Around the Markets
Naturally, imminently rising rates would be bullish for the dollar. The USD moved higher this morning, adding 0.3% on the DXY index to 101.6. Treasurys continued to see selling pressure for this same reason: if interest rates go up, then government bonds will offer better yields, so many traders will delay purchasing Treasurys until after tomorrow’s meeting. The benchmark 10-year T-note yield rose to 2.61% on Tuesday. For the second straight day, stocks on Wall St trended lower.
The biggest factor affecting the economy the next several days could be the blizzard conditions being experienced across much of the Midwest and Northeast of the U.S. The storm is expected to bring heavy winds and as much as 20 inches of snow in some areas, impeding many businesses from operating. Schools have closed across the region, flights are being delayed, and economic activity will slow in general.
The nor’easter blowing through the area will also drive fuel costs higher as the cold and inclement weather persists. Natural gas prices have jumped over 15% the past month as preparations for the late winter storm began to be made. Meanwhile, crude oil prices still were slumping due to concerns about growing U.S. inventories. WTI crude fell over 1.8% on the NYMEX to just $47.50 per barrel, its lowest in 3-and-½ months. Brent crude also slipped more than 1.5% to $50.50/bbl.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.