Markets are holding their breath ahead of Janet Yellen’s 12:20pm speech before the Economic Club of New York. Gold prices have shaken off overnight weakness to once again break above the $1,220 mark. The dollar gave up overnight gains to trade near unchanged this morning,
June gold settled at $1,222 an ounce on Monday, down $1.50. Spot gold fell by $5.10 to close at $1,221.30, near the session high. At 10:30am Eastern Time, gold is trading at $1,227.20, up $5.90 and near the session high
Technical levels this morning show gold’s first support line at $1,220, with the next support level at $1,218. First resistance is at $1,226, with the next hurdle at $1,230.
Wall St. opened sharply lower this morning, following European shares lower. However, the news that consumer confidence for March came in a bit higher than expected has helped to erase most of that fall.
Crude oil futures suffered their fourth day of losses Monday, giving up the “hope” rally earlier in the month. WTI settled down 7 cents to $39.39 a barrel. Brent crude, the international benchmark, was down 17 cents to $40.27 a barrel. Oil prices are down almost 3% this morning, as analysts expect another rise in US oil stockpiles to set another all-time record.
San Fransisco Fed president John Williams was at it again this morning. Williams, who is touring Asia, spoke this morning at the University of Singapore, where he said that the Fed should basically ignore what is happening in the economies of other nations. Providing a bullish reading of the US economy, he said “If we have inflation moving clearly towards 2 percent, if the U.S. economy continues to improve the way it did last year…I think the economy could easily handle two or more (rate) increases this year.“
Is he reinforcing the recent hawkish views of several regional Fed presidents ahead of Yellen’s speech as an effort to show consensus with her plans for a rate hike soon, or is he trying to pressure Yellen into being more hawkish than she wants? We should find out at 12:20.
The raft of weak economic data released Monday may prove to be “hawk repellent” for the FOMC meeting in four weeks. The Atalanta Fed GDPnow tool today dropped the estimate of first quarter GDP by more than half from the previous reading. It forecasts that GDP will only increase by 0.6% now, compared to 1.4% last week. In addition, the CME Group FedWatch tool has lowered the chances of an April rate hike to just 9%. It is giving a 36% chance for a June rate hike.
Blackrock and Pimco are both warning clients that inflation will start picking up soon. According to them oil prices will start rising as higher-cost producers are force out of the market.
Blackrock, which has $4.6 trillion under management, advises people “We like inflation-linked bonds and gold as diversifiers.”
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