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Federal Reserve concludes FOMC meeting

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Today the Federal Reserve’s Federal Open Market Committee (FOMC) meeting concluded, capped by their statement which contains the most current monetary policy as well as a press conference with Fed Chairman Jerome Powell.

As many analysts predicted the Federal Reserve did not fast-forward the timeline to raise their Fed funds rate (the interest rate that banks and other depository institutions lend money to each other). The current Fed funds rate will remain between zero and 25 basis points (1/4%).

Although they discussed their current asset purchases of $120 billion monthly, the Federal Reserve statement and Chairman Powell announced that they will likely reduce their monthly purchases of mortgage-backed securities and U.S. debt instruments simultaneously when data shows substantial progress in the economy. During the press conference Fed Chairman Jerome Powell said, "There really is little support for the idea of tapering MBS earlier than Treasuries. I think we will taper them at the same time," although he added that, "The idea of reducing MBS purchases at a somewhat faster pace than Treasuries does have some attraction for some people - others not so much. I think it’s something that we’ll be continuing to discuss."

According to Forbes Advisor, “The Fed did not, as expected, lift interest rates from their near-zero level, nor did it announce when it planned to let up on its $120 billion in monthly bond purchases. Nevertheless, with inflation soaring quickly and some employment measurements finally starting to show sustained improvement, it did hint at considering such a move in the future.”

Yesterday Citibank’s U.S. economists correctly reported that they “expect the July 28 FOMC meeting to be broadly neutral, with the Fed acknowledging the possibility of a new Covid wave while remaining optimistic about the outlook and watchful for upside inflation risks.” They also suggested that investors should “expect the Fed to have detailed discussions about tapering, and likely make some decisions about the nature of tapering and policy sequencing, but without disclosing full details or timing." ‘

They were also 100% correct on their takeaway that they were biased to fade U.S. dollar strength. As of 5:52 PM EST the dollar index is down 14 points and fixed at  92.295.

As of 5:58 PM EST gold futures basis, the August 2021 Comex contract is fixed at $1806 which is a net advance of just over six dollars per ounce. As the most active August 2021 Comex contract is coming up for the first notice day, traders are rolling over to the next most active contract which will be the December 2021 contract month. Currently, the December contract is trading up $6.90 and is fixed at $1811.50 as trading begins in Australia.

With today’s conclusion of the FOMC meeting, we can expect further dollar weakness and gold to firm up from their recent lows and begin to trade higher once again.

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer