Fed Gazing Weighs On Gold

Equities have gotten the word, from Asia to London to New York. The Fed is not interested in a rate rise anytime soon. Consequently, those markets, except for the Nikkei (which was down marginally), are all up. The German DAX and Shanghai were each up over 2%.

The U.S. dollar traders have gotten the word, too, finally taking some wind out of the sails of the greenback rally.

Before we discuss crude oil, though, it’s important to note that gold – indeed the whole precious metals complex – has not gotten the word.

U.S. economic indicators are looking pretty anemic for February (as reported in March), except for employment, which in its up ticking now seems anomalous. As we noted last week, consumer spending is spiraling downward. Industrial activity is down. Both the core and broader gauges of inflation are stagnant or down. Wage growth is modestly up, but is absolutely no threat to drive prices higher.

That brings us to oil.

West Texas Intermediate crude was down over 3% through most of the course of the trading day, although some bargain hunters have stepped into the late afternoon activity to bid up the commodity. Nevertheless, it is still down nearly 2%. Brent North Sea is also down, although not be the same dramatic amount.

WTI seems ready to flirt with the $40 per barrel level once more. Such low levels of oil pricing are disinflationary. So, right there, you have conditions arguing against a Fed rate hike. People in the Fed “house” and outside – investors and analysts – who are pushing a rate rise must read different data than the rest of us. Either that, or their thinking is hamstrung by some sort of economic ideology.

While many non-voting members garner headlines with their rickety predictions, it is worth acknowledging that only two FOMC or voting members this year are firmly in the hawkish camp as of this moment. In the first week of March, in fact, FOMC member Charles Evans of Chicago said he didn’t think that there was a need for a rate increase until at least 2016. He is predicting the U.S. economy won’t be back on track fully until ’18.

Fear and the speculation built on fear are dangerous to trading and orderly economic activity. There are plenty of real issues to be worried about in the world. There is no need to be fearful of silly ones, the proverbial things that go bump in the night.

What is even worse right now for traders of every stripe is that there is no real fresh news to put in the hopper for analysis. Thus we are stuck with somewhat mindless Fed gazing.

Wishing you as always, good trading,