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Precious Metals Mixed as FOMC Begins

July 25th, 2017 by

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Tuesday morning saw gold prices pare the previous day’s gains when spot prices opened modestly in negative territory in New York. Gold held above the $1,250/oz mark, which has formed as new support level—albeit a frail one—for prices. It’s more likely, however, that roughly the $1,236 per ounce line is a more realistic near-term support for gold, especially following the conclusion of the July meeting of the FOMC tomorrow afternoon.

The gold market has a habit of shedding some money in the wake of Fed decisions as a result of positions being liquidated once the central bank’s position (at least for another month!) is publicly known. There is also some natural profit-taking after the metals have rallied several days in a row.

Meanwhile, silver prices actually added 3¢ (0.2%) to trade right at $16.50/oz. Platinum and palladium were mixed, as well.

Fed Meeting

The two-day Federal Reserve Open Market Committee (FOMC) meeting kicks off today. While the Fed is not expected to make any moves on interest rates given the relatively low inflationary environment, traders and investors relish taking note of even the slightest changes in the central bank’s thinking or outlook. (Oftentimes, they do so at their own risk.) Based on futures trading, the first Fed meeting where there is at least a 50-50 split in rate-hike expectations isn’t until December. (The Fed has raised rates at its December meeting each of the last two years.)

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Fed decisions (even non-decisions) provide investors with some degree of greater clarity. With so much uncertainty surrounding not just Wall St but also Washington, D.C., the potential becomes greater for differing perspectives on policy and the economy to cause disruption to markets. Right now, Wall St is pervaded by a risk-on sentiment despite indices already trading at or near all-time highs. Bonds fell slightly on Tuesday while stocks in the U.S. pointed higher, responding to second-quarter earnings reports. Major firms across different sectors from McDonald’s to Caterpillar to General Motors have beaten expectations, helping to lift equities.

Of course, a handful of gold mining firms have been among those companies reporting. Investors are rewarding both Newmont Mining (NEM) and Freeport-McMoRan (FCX), two of the industry’s titans, for drastically improving their respective profit profiles during Q2. Shares of FCX jumped 14.5% during trading on Tuesday.

In other commodities, crude prices got a big lift from Saudi Arabia’s commitment to hold back more of its oil production. The OPEC leader will pursue a stricter cap on its oil exports, though will not necessarily limit its production at the pump. WTI crude traded 2% higher on Tuesday, crossing above $47.30 per barrel.

In terms of the constant “White House Watch” to see what new distraction is impeding the Trump administration’s agenda this time, the president’s son-in-law (and senior White House advisor), Jared Kushner, will continue his congressional testimony regarding meetings he had with “foreign agents” with alleged ties to the Russian government prior to last November’s election.

 

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.

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