Tick-Tock, Tick-Tock – Waiting on The Fed

The long anticipated FOMC meeting began today. It seems to be a near certainty that this meeting will result in a rate hike. This occurs as the net result of statements which have been made recently by various members of the Federal Reserve.

According to MarketWatch, “It was with a palpable sense of urgency that Federal Reserve officials took to the airwaves two weeks ago, to make their intentions crystal clear. Everyone from Fed Chairwoman Janet Yellen to Vice Chairman Stanley Fischer to New York Fed President Bill Dudley to the normally dovish Governor Lael Brainard all but pre-announced an increase in its benchmark rate, to be formalized at the conclusion of its meeting on Wednesday.”

The Federal Reserve, for the most part, looks to convey clarity as well as transparency. Yet, rarely if ever, do you see such a unified front to announce its intentions. This time around it seems clear that Fed members want their intentions in the forefront. With such transparency, the real question becomes how large of a rate hike will be announced tomorrow. An even more important question relates to what the tone and timbre of future moves by the Federal Reserve will be.

The Post Meeting Statement by Janet Yellen

In the case of this month’s meeting, it’s all about what occurs after the session is over. Market participants will listen closely, hanging on each word, for clues as to what Fed actions lie ahead. Listening to the post-meeting statement by Janet Yellen may help determine whether the Federal Reserve is looking to implement a more hawkish or aggressive tone than in previous sessions.

The Federal Reserve is on record stating that it wants a total of three rate hikes this year. A more hawkish tone might involve an additional rate hike, or it might include a more aggressive goal in terms of where it wishes to see fed funds rates by the end of 2017. Although it is widely believed that market participants have factored in a rate hike, there remains uncertainty as to what their overall plan for the remainder of the year is.

Gold Breaks Below 1200

In anticipation of an impending rate hike tomorrow, gold prices have once again broken below a critical support level at $1200 per ounce. Today’s lower pricing is primarily the direct result of a stronger US dollar. The US dollar index is currently up .42% at 101.74, a net gain of 43 points. Per the KGX (Kitco Gold Index), today’s 5.10 decline is composed of -.90 attributed to selling in the market, with the remaining $-4.20 the direct result of a strong US dollar.

Regardless of the outcome tomorrow, much of the uncertainty which fills the air will be replaced by hard facts and knowledge as to the current rate hike. It is also possible that post-meeting statements made by Janet Yellen will add a few more pieces to the never-ending puzzle that is the American economic landscape.

Wishing you as always, good trading,