Did You Hold Onto Your Money Today?

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While waiting for the Fed to speak, it seems almost all sectors of the marketplace were holding their collective breath. The U.S. dollar stayed extremely strong, except against the yen, which seems to have escaped gravity’s pull.

All of gold’s loss today is attributable to dollar strength.

The Fed did speak – tersely – but it held great meaning. It maintained its pledge to be “patient,” and said “Economic activity has been expanding at a solid pace. “Labor market conditions have improved further, with strong job gains and a lower unemployment rate.” The FOMC statement also said inflation “is anticipated to decline further in the near term,” while also stating that price gains are likely to “rise gradually toward 2 percent over the medium term as transitory effects of low energy prices dissipate.

It is this confrontation of two distinct trends that seems to be troubling all markets. Higher employment usually leads to higher wages, which in turn leads to higher prices in consumer and other goods.

The FOMC also tipped its hat to “international developments,” (meaning economic energy). That is shorthand for, “we’ll see what effect quantitative easing has in Europe, and how China and Japan do.”

The Fed also dropped its pledge to keep rates low “for a considerable time,” a telling deletion.

The net effect? All three American exchanges are down around 1%. The 10-year yield on U.S. bonds fell. And oil…

Crude was down 4.25%. How low can it go before they start giving it away? West Texas Intermediate is down to its lowest since June of 2009, a period that represented the teeth of the Great Recession. However – it has probed this level before and bounced back up. Mid-to-long-term prospects are good, and there are reports that the price of gasoline has bottomed and will go up, even if moderately.

The greenback was up against the euro and GB pound, but slightly off against the yen.  

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer