gold safe haven

Gold Higher, World on Alert

September 19th, 2016 by

Source: Business Insider

Source: Business Insider

Investors may once again be turning to safe havens as the world confronts another spate of potential terror attacks have once again roiled the Northeast United States. This morning, the gold price was about $5 per ounce higher to $1,315/oz while spot silver added over 2% to trade around $19.25/oz.

In addition to the heightened terror threat, a trio of major central bank meetings this week is also expected to drive the markets depending on what direction, if any, these monetary authorities decide to move in.

Suspected Terror Plot

The news this weekend was dominated by multiple cases of suspected terror activity in the U.S. On Saturday, a bomb exploded in New York City in Manhattan, injuring at least 29 people. Authorities have disclosed that there were four other bombs placed at a train station that did not detonate.

Map of New York and New Jersey

Elsewhere nearby, an idle explosive device made from a pressure cooker was found while yet another pipe bomb went off at Seaside Park, New Jersey on the same day. Nobody was hurt in the latter two cases, thankfully.

FBI agents are currently investigating the bombing in New Jersey and have identified a suspect.

While gold was slightly higher on Monday, stock markets in the U.S. were undeterred, opening about 0.4% in the green. Global indices were also higher across the board. Traders in China are turning to the markets today following a two-day holiday.

Fed Watching

Volatility has returned to the markets after a slow summer, but investors will likely jump into action after this week’s slew of central bank meetings. The Bank of Japan (BOJ), Federal Reserve, and the Bank of England (BOE) will all make policy decisions between the 20th and 22nd. The markets don’t expect the Fed to raise interest rates this month despite Fed officials’ continued overtures about how the case to do so is strengthening.

frankenstein“The main reason [for inaction] is the belief that the Fed does not want to surprise the markets,” Michael O’Rourke of Jones Trading explained. He said that the Fed continues to worry about popping the market bubble that it has created with so much stimulus. This risk of a market sell-off has been the running narrative for why the Fed has declined to tighten monetary policy yet in 2016. This lack of action has been the case all year in spite of the Fed’s own evaluation that such a move would be appropriate.

“The Fed is trying to avoid having its own Frankenstein monster turn on it,” O’Rourke added.

The 10-year Treasury note yield, always sensitive to interest-rate talk, has recovered to about 1.70%.

On the other end of the spectrum, the fallout from the Brexit vote may compel the Bank of England to act by cutting rates. The central bank took no action at its last meeting, but the BOE has said it will expand into buying corporate bonds as a form of quantitative easing (QE). Meanwhile, the BOJ is the most likely candidate to announce a new round of stimulus to revive its sluggish economy.

 

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.