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Gold Shrugs Off Hawkish Fed Comments

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Published : January 13th, 2017
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Category : GoldWire

The Fed officials have offered hawkish comments recently. What do they mean for the gold market?

As we reported on Monday, a few regional Fed presidents provided hawkish comments last week, strengthening the case for a faster tightening this year than in 2016. For example, Charles Evans considered three hikes in 2017 as not implausible, while Jeffrey Lacker warned markets that the Fed may increase interest rates quicker than investors expect.

Yesterday, Patrick T. Harker, president of the Philadelphia Fed, joined that chorus in his first public speech as a voting member of the FOMC and said that economy was looking good, the labor market was strong, while inflation was returning to the Fed’s target. Hence, he saw “three modest hikes as appropriate for the coming year, assuming the economy stays on track”.

Interestingly, gold shrugged off all these hawkish comments and jumped above $1,200 yesterday (but only for a while). Gold’s behavior signals that the lack of clarity on Trump’s economic policies is now one of the most significant drivers of gold prices. As we wrote after Trump’s disappointing press conference, “the uncertainty about the U.S. economic policy of the new administration is positive for the gold market”. It seems that the price of gold may increase further until the Inauguration Day on that uncertainty. However, the presidential inaugural address may reduce the uncertainty and end gold’s upward move, just as the presidential election did. Gold declined in the aftermath of the election, since the biggest political uncertainty was removed from the markets. This is why the yellow metal is likely to decline once Trump moves ahead with his economic plans, whatever they are. However, the decrease will be strengthened if Trump pleases the markets. On the other hand, if the newly appointed president disappoints investors significantly, gold may go north, even if the uncertainty about the new administration’s policies diminishes.

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Gold News Monitor
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Przemyslaw Radomski is the founder, owner and the main editor of www.SunshineProfits.com. Being passionately curious about the market’s behavior he uses his statistical and financial background to question the common views and profit on the misconceptions. “Don’t fight the emotionality on the market – take advantage of it!” is one of his favorite mottos. His time is divided mainly to analyzing various markets with emphasis on the precious metals, managing his own portfolio, writing commentaries, essays and developing financial software. Most of the time he’s got left is spent on reading everything he can about the markets, psychology, philosophy and statistics. Mr. Radomski has started investigating the markets for his private use well before starting his professional career. He used to work as an informatics consultant, but this time-consuming profession left him little time for his true passion – the interdisciplinary market analysis. Establishing www.SunshineProfits.com gave him the opportunity to put his thoughts, ideas, and experience into form available to other investors.
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