FOMC Meeting Concludes and Fed Stays the Course

November 8, 2018 - 4:42pm

 by Gary Wagner

This afternoon the Federal Reserve concluded this month’s Federal Open Market Committee (FOMC) meeting. Immediately following the conclusion of today’s meeting, the Fed released a statement. There was no press conference held after the meeting. However, Chairman Powell has stated that next year every meeting will conclude with a press conference.

“The labor market has continued to strengthen and ... economic activity has been rising at a strong rate.”

As anticipated, the statement that was released confirmed that the Federal Reserve will hold interest rates steady and said that ongoing strong job gains and household spending have kept the U.S. economy on track. Currently, the Fed has its benchmark target for interest rates (Fed funds rate) at 2% to 2.25%.

The statement also confirmed that there is a high probability that they will move forward with one more rate hike this year which will be announced at the conclusion of the December FOMC meeting. “The Committee expects further gradual increases in the target range for the federal funds rate.”

The tone of today’s statement was very much in line with the existing Federal Reserve’s monetary policies. In fact, the only change from the last statement released by the Fed was that members noted that “the growth of business investment had moderated in the third quarter.”

According to the CME’s FedWatch tool, the probability remains high that there will be one more rate hike in December. This tool is predicting that there is a 71.4% probability that there will be a quarter percent increase in the Fed funds rate, a 6.4% probability that there will be a half a percent rate hike and a 22.2% probability that the Federal Reserve will leave rates unchanged in December.

The dollar had been trading 50 points higher prior to the release of today’s statement and then strengthened immediately following the release of the statement. As of 4:30 PM Eastern standard time, the dollar index is currently up 0.73% and fixed at 96.50.

Dollar strength contributed to weakness in gold pricing today with gold futures currently trading down $4.60 at $1,224.10. Spot gold is currently fixed at $1,222.90, which is a net decline of $3.20 on the day. On closer inspection, we can see that market participants are actually buying the precious metal today bidding gold prices higher by $3.30, however after factoring in dollar strength which amounts to $6.50, we get the net result of gold losing $3.20 on the day.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
Sent last week-- Trade Alert: Major Breakout in Gold, Buy December gold @ the market
Current price is 1234.30 up +19.40. Stop below today’s low @ 1216
Maintain long December @ $1234.30 and stop @ 1$215.13
Gold Market Forecast

Once again it has been dollar strength that has completely defined recent weakness in the precious metal’s markets, which of course includes gold and silver. Today prior to the release of the FOMC statement the dollar index was trading a half a percent higher. Once the statement was released the dollar increased in strength, and as of this writing is up almost ¾ of a percent on the day.

On a technical basis gold prices have still held above the two key and critical areas we are deeming as critical support levels. The first of which is the 100-day moving average, and the second price point is derived from a .618% Fibonacci retracement. As long as these levels hold, we could still see gold move to higher prices.