Fed Vice-Chairman Janet Yellen is to be nominated to succeed Ben Bernanke as Fed Chairman today in a White House announcement this afternoon. Considered by some to be more dovish than even Bernanke, it is expected that she will be even more reticent to taper the $85 billion a month of Fed bond purchases until the economy is unequivocally on solid footing. Due to this outlook, the dollar usually drops when her name is mentioned as the new Fed boss, but today, the greenback is showing sustained strength on the news that Yellen has locked in the top job at the Fed.
This is thought to be because she will be forceful in using the powers of the Fed to help the economy recover from the ego-driven antics in Washington over the federal budget and the debt ceiling. The wife of a Nobel Prize-winning economist, Yellen herself has a PhD in economics, and is arguably the most experience person to ever be named as Federal Reserve Chairman.
Back to the markets, Wall St. loves Janet, and opened strong. Despite the increased devaluation pressures a Yellen Fed will cause for the dollar, the dollar has been gaining since the news broke, which is pressuring precious metals. Oil is easing as well, which is also bearish for gold.
With the partial government shutdown in its ninth day (remember when the sequestration was thought to be too horrible to allow, and now is the budget baseline?) the government is not releasing many economic reports, leaving markets without guidance. However, the MBA mortgage report and the minutes of last month’s September “non-taper” meeting of the Federal Reserve Open Market Committee are due today.
Some short-term traders were disappointed in gold not improving substantially over the government shutdown, and are exiting. The Chinese markets were closed all last week for holiday, which removed the largest source of physical gold demand and helped mute gold’s movements.