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USAGOLD/Peter Grant/07-25-17
Gold is consolidating recent gains as the Fed begins their two-day FOMC meeting. While the Fed is not expected to change policy, there is perhaps some scope for changes to the wording of the statement.
Will they make an effort to get September back on the table with a more hawkish tone? Will they concede September and start trying to build expectations for December? My guess is that there is little to no change in the verbiage from June. We’ll find out tomorrow at 2:00ET.
With the dollar still under pressure, the path of least resistance in the gold market remains to the upside. The dollar index set yet another 13-month low today, leaving the 2½-year low from May 2016 at 91.92 vulnerable to a challenge. The last time the dollar index was below 92.00, gold was on its way above $1300.
With expectations of stimulus from the fiscal side continuing to wane, the weakness in the dollar over the past five-months — despite rising rates — probably looks pretty appealing to policymakers. I’m not sure they’d be terribly inclined to upset that apple cart at this juncture.
The ones that are probably upset are the Europeans, which saw their currency surge to 2½-year highs, despite no expectations of imminently tighter policy. Apparently Mario Draghi and the ECB simply weren’t dovish enough last week. The euro is up nearly 11% year-to-date, which is certainly not going to help the export driven European economy.
Do we have the makings for a revived currency war? That may be in the near-term offing as well, even as rumblings of trade-wars echo simultaneously.
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