Gold Sits Fed Dance Out For The Day As Equities Pop

Gold remained somewhat static in price today, not surprising since equities and crude moved up strongly based on various statements from Federal Reserve officials.

No one should focus on any one data set, as Fed Chairwoman Janet Yellen said today in her speech before the World Affairs Council of Philadelphia. But, we are not concerned with simply one set of data points in the least.

May’s Bureau of Labor jobs reports certainly could be an anomaly, except it isn’t. April’s tepid employment numbers were revised downward and inflation is dead in the water. Engine is stalled. No fuel is being added to the boiler.

Yellen, who said a few weeks ago that she thought that the Fed would raise its benchmark interest rate “in the coming months,” omitted those words from today’s speech, casting a spotlight on the weakness of job growth in May, which indeed has caused the Fed to rethink its plans.

However, she also said, “I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones.”

Regardless of all that, we can be reasonably assured that rates will not be raised next week at the FOMC meeting.

A sampling of the most current stances of some Fed officials might even cast doubt on the likelihood of a hike in July.

Loretta Mester, president of the Federal Reserve Bank of Cleveland, is confident that the economy is ready for a rate increase. She said Saturday in Sweden that the May jobs report, while disappointing, did not alter her overall economic assessment. (Let the workers eat cake!)

There was a change of tune from James Bullard, president of the Federal Reserve Bank of St. Louis. Like Mester, Bullard is one of the ten officials with votes on monetary policy this year. H told The Wall Street Journal that he would like to seriously consider raising rates in July. Presumably, that means June is off the table despite his windy speeches of late.

Lael Brainard, a “permanent” Fed governor continues to urge caution in raising rates, describing the jobs report as “sobering” on Friday in a speech in Washington.

Additionally, Daniel Tarullo, a Fed governor who shares Brainard’s caution (dovishness), said Thursday in an interview with Bloomberg that he still was looking for “an affirmative reason to move.”

We agree with the doves wholeheartedly. Tarullo’s “affirmative reason to move” comment is a bracing antidote to the ideologists who are champing at the bit because “it’s time” to raise the rates.

Part of gold’s inactivity has been due to a stronger U.S. dollar against the euro but that seems to be swinging into “unchanged” mode as we near the closing bells. However, the greenback is up nearly one full percent against the yen, indicating the absence of much call for haven plays.

In fact, the yield on the U.S. 10-year bond has inched up, telling us that buyers aren’t all that interested in escaping through the ultimate safety hatch today.

Crude oil is again setting its sight on $50 per barrel. That gave U.S. stocks the extra edge they have been looking for to continue rallying. The general S&P 500 index is over 2110 at 3:45 in New York. The Dow is up 0.75% and NASDAQ is right on its heels.

Interestingly, the London FTSE closed a full percent higher. Maybe City traders think the Brexit will be good for business. Funny – no one else really does.

The Brexit referendum will be held on June 23.

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Wishing you as always, good trading,