Don’t Rock the Boat Baby

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Don’t rock the boat baby, don’t tip the boat over. These lyrics by the Hues Corporation are incredibly appropriate when considering today’s statement made by the Federal Reserve following this month’s FOMC meeting. The statement indicated that they would leave interest rates as they are and maintain their projected pace to raise rates two more times this year. Collectively these two statements suggested that the Federal Reserve continues to be accommodative.

The statement said that “Inflation on a 12-month basis is expected to run near the committee’s symmetric 2 percent objective over the medium term …The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate.”

According to Bloomberg Markets, “Officials may have signaled their willingness to allow inflation to exceed their 2 percent goal somewhat by adding a reference to the “symmetric” nature of their target.”

Today’s statement by the Federal Reserve was as expected. The dollar index which had been trading moderately higher on the day immediately reversed and is currently trading off by .11%. Gold which had been trading unchanged as market participants awaited today’s statement climbed to higher ground after the announcement.

Currently, gold futures are trading at $1,312.70, up $5.90 on the day. In an interview with MarketWatch, Alasdair Macleod, head of research at Goldmoney said, “We have noticed this last week an increase in short sales in gold and silver futures, which should be confirmed in the Commitment of Traders Report on Friday,” he said. “That being the case, we expect recent weakness in gold and silver to be reversed.”

Gold Holds Critical Technical Support Levels

Yesterday’s dramatic decline in gold took prices to a critical point that on a technical basis could either indicate a key reversal-pivot or signal an acceleration of the selling pressure that existed. The lows achieved in trading yesterday took pricing just above the 200-day moving average which also intersected a 50% Fibonacci retracement. The dataset used for the Fibonacci retracement begins in December 2017, when gold was trading at $1,238 per ounce, and runs to the highest trading point this year at $1,369. The midpoint of this dynamic rally occurs at $1,303.90.

On Friday the U.S. Labor Department will release last month’s jobs report, which will be the most essential data released this month. Today’s release of the ADP employment report came in slightly above economic estimates. The numbers revealed a total of 201,000 jobs added, which is 11,000 above the original forecast.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer