Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Gold Market Right After Super Wednesday

Commodities / Gold & Silver 2019 Apr 11, 2019 - 06:43 PM GMT

By: Arkadiusz_Sieron

Commodities

Super Wednesday is behind us! The masters of monetary policy have revealed their cards. The Fed released the fresh minutes, the ECB held its monetary policy meeting, while the Brexit was postponed again. How will all these play out in the gold market?

Minutes Show Patience among the FOMC Members

The minutes from the pivotal FOMC meeting show that the Fed saw the first-quarter economic slowdown as transitory and that the real GDP growth would bounce back solidly in the second quarter. Although the yield curve inverted for a while, the central bankers noted that the unusually low level of term premiums in longer-term interest rates has made the yield curve a less reliable economic indicator.


However, although the policymakers do not see recession for the United States in the near future, they are not going to hike interest rates this year. Indeed, the key paragraph of the March minutes is as follows:

With regard to the outlook for monetary policy beyond this meeting, a majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.

Hence, the Fed stressed again that it will remain patient for now. A more dovish Fed implies lower real interest rates and, thus, weaker tailwind for the US dollar.to appreciate. From the fundamental point of view, these factors should support the gold prices. However, investors should remember that one of the reasons why the US central bank softened its stance on monetary policy is subdued inflation. We are, of course, aware that the CPI rose 0.4 percent on March, but the core inflation rate declined from 2.1 to 2.0 percent on an annual basis. Gold bulls would definitely prefer a much stronger price pressure.

The ECB Confirms Economic Slowdown, but Does Not Change Its Policy

As expected, the ECB kept the monetary policy parameters unchanged on Wednesday. However, Draghi noted that the recent data “confirms slower growth momentum extending into the current year”. Indeed, the IMF sharply downgraded growth in the euro zone one day earlier. It now expects the bloc to grow at 1.3 percent in 2019 – compared to 1.6 percent forecasted six months ago. Moreover, the balance of risks remained negative, as the ECB President pointed out that “the risks surrounding the euro area growth outlook remain tilted to the downside.”

Hence, the ECB has been recently forced to backtrack its monetary tightening plans amid the global economic slowdown. It’s likely now that Draghi will not deliver a single interest rate hike before his presidency ends later this year. A less hawkish ECB makes for a weaker euro against the US dollar, which should undermine gold’s appeal. However, Mr. Draghi did not say anything revolutionary, so the impact on the precious metals market would be likely limited. Indeed, the EUR/USD fell yesterday, but then it quickly rebounded, as the chart below shows.

Chart 1: EUR/USD exchange rate from April 9 to April 11, 2019


Implications for Gold

What does it all imply for the gold market? Well, the price of the yellow metal rose yesterday, as one can see in the chart below.

Chart 2: Gold prices from April 9 to April 11, 2019


Major central banks being dovish, the Fed in particular, combined with the uptick in the American CPI, provided some support for the gold prices. But gold investors should be aware of headwinds later this year. We refer here to the fact that the markets see a more than 50 percent chance of a Fed rate cut this year. But there is little in the minutes that warrants a rate cut by December. If the market expectations adjust, gold may struggle. Another issue is that the European Union leaders agreed yesterday to grant the British Prime Minister Theresa May a new Brexit deadline of October 31, 2019. As the Brexit has been postponed, the risk appetite may strengthen among the market participants, affecting negatively the safe haven assets.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in