Spot Gold Pauses On Fed Day

September 20th, 2017 by

Chair Yellen taking questions. (Photo: Federal Reserve)

Chair Yellen taking questions. (Photo: Federal Reserve)

Virtually all activity in the markets, including the precious metals, will be governed by one fact on Wednesday: it’s Fed Day. Analysts are mostly split on what the central bank will do, making it essentially a 50-50 shot that the Federal Reserve will raise rates another 25 basis points at either this meeting or in December. (Very few expect to see a rate hike at both.) The announcement of the Fed decision will come at 2 pm ET, followed by a much-awaited press conference where Chair Janet Yellen will speak around 2:30 pm.

Spot gold traded higher overnight but fell back to about $1,311/oz this morning when markets opened in New York. Meanwhile, spot silver lost 4¢ (-0.25%) to trade at $17.23/oz. Platinum slipped by 0.5% and palladium traded virtually flat, right at $900/oz.

Here are yesterday’s closing numbers:

Gold: $1,310.60/oz (+$3.50, +0.27%)
Silver: $17.27/oz (+10¢, +0.61%)
Platinum: $951/oz (-$9, -0.94%)
Palladium: $901/oz (-$27, -2.91%)

Dow Jones: 22,370.80 (+39.45, +0.18%)
S&P 500: 2,506.65 (+2.78, +0.11%)
Nasdaq: 6,461.32 (+6.68, +0.10%)
DXY: 91.84 (-0.13, -0.14%)
WTI crude: $49.86/bbl (-5¢, -0.10%)

Stocks around the world were largely unchanged, with only modest movement in either direction. Equities in the U.S. look to continue their march toward new record highs, but the three major indices opened only a shade above Tuesday’s levels. The dollar was slightly lower on the DXY index to 91.75, ceding a bit of ground to its three biggest competitors: the euro, the pound sterling, and the yen.

Beyond any changes to interest rates, the Fed has also been signaling that it will begin to trim down its massive balance sheet of assets that ballooned during the manic period of “quantitative easing.” You can take a look below at how enormous this expansion of assets became over the past eight years or so.

Image courtesy of Bloomberg

While this aggressive and unprecedented stimulus is often cited as the reason markets stabilized after the financial crisis, the Fed now finds itself in a seemingly impossible situation: Can it unwind its huge positions in these securities and government bonds without causing a huge disruption to the market? This question won’t be answered in a single “Fed Day,” but everyone will be cued in for clues from Yellen this afternoon.

Beyond the financial markets, there is mourning and prayer for yet another series of tragic instances involving disruptive weather and natural disasters in the Western Hemisphere. Not only is Hurricane Maria (a Category 4 storm) battering Puerto Rico right now, but Mexico was rocked by its second earthquake in the span of two weeks. Destruction in the capital Mexico City was widespread, resulting in more than 200 fatalities. In an awful bit of irony, this 7.2-magnitude tremor occurred on the anniversary—literally, to the day—of an 8.0-magnitude quake in 1985 that took the lives of some 5,000 Mexican people.

 

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.