FOMC Meeting Begins Today as Gold Closes Lower on the Month

Gold prices traded under strong selling pressure today as the Federal Open Market Committee meeting begins. This two-day meeting will conclude tomorrow with a statement, and although no real changes are expected, traders and market participants are waiting in a holding pattern.

Gold futures, as of 4 o’clock EDT, are fixed at $1271.60 for a net loss of $6.10 (-0.48%) on the day. Spot physical gold is also trading under pressure and currently fixed at $1270.60 for a net loss of $5.40. On closer inspection, according to the Kitco Gold Index (KGX), we can see that it is predominantly sellers in the market bidding down the precious yellow metal. Only $0.50 of today’s $5.40 decline can be directly attributed to a stronger U.S. dollar, with the remaining $4.90 of losses as a net result of sellers in the market.

Yesterday we spoke about a potential double bottom in gold as prices exhibited a second day of higher pricing. Today’s selling pressure has taken back roughly 80% of the gains which resulted from Fridays and Mondays price increase.

While we still see the potential for a double bottom and higher pricing, today’s selling pressure certainly reduces the potential. However, as of today, we still see support in gold at $1264 per ounce. At the same time, it must be noted that today’s trading range included a lower high than the previous day as well as a lower low than yesterday’s trading activity.

Of great interest to gold traders and investors is who will become the next Fed chairman. As reported by MarketWatch, Michael Armbruster, managing partner at brokerage firm Altavest, said that he believes “the biggest mover for gold this week” will be the announcement of the new Fed chairman. “Barring a surprise, I would say that [Fed Gov.] Jerome Powell would be mildly bullish for gold. Powell’s nomination would be a signal that the Trump administration hopes for a continuation of the Fed’s easy money policies to keep the economy and stock market on their current trajectory.”

Lastly, market participants are intensely focused upon whether the current administration can muster up support for major tax cuts. Reports surfaced yesterday which alluded to a multi-year implementation of a tax cut. Such a tax cut would take place in segmented yearly reductions over a period of five years. If such a plan is proposed and implemented, it could have an adverse effect on the relative strength of the dollar as well as US equities.

Wishing you as always, good trading,