Powell Stands Pat as Patience Guides the Fed

May 1, 2019 - 5:55pm

 by Gary Wagner

The May FOMC meeting has concluded today and as anticipated the Federal Reserve has left interest rates alone. According to the statement released immediately following the conclusion of today’s meeting the Fed “will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.” In a unanimous vote of 10 – 0 voting Federal Reserve members decided to leave the target range for benchmark federal funds rates at 2.25% - 2.5%.

“Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

The initial reaction in the financial markets ran in tandem with recent strong economic data, with U.S. equities and gold prices moving higher. Noteworthy data included a robust 3.2% annualized pace of GDP from January to March. However, both U.S. equities and gold pricing would take 180° turn as Fed Chairman Jerome Powell began his press conference. Within the first five minutes of Powell’s press conference U.S. equities and gold both began to selloff dramatically and the U.S. dollar firmed.

Within five minutes after the release of today’s statement gold futures traded from a low of $1283 to a high of $1289.40. Over the next 25 minutes the time between the release of the statement and Chairman Powell’s press conference gold prices remained steady trading in a narrow and defined range of $1286-$1289.40, the high of the day.

At 2:30 PM Eastern standard time as Powell began to speak gold would drop from $1288.02 to $1274.50 in the span of 15 minutes. Market participants reacted quickly to statements made by Federal Reserve Chairman Jerome Powell as he said U.S. inflation is possibly being dragged down by “transitory” forces and there is no bias to either tighten or ease monetary policy.

The entire precious metals complex closed lower on the day with gold sustaining the least percentage drawdown. Gold futures lost .63%, and closed just off of its daily low at $1277.70, an $8.00 decline. Palladium experienced the greatest percentage drawdown today losing 3.10%, and after factoring in today’s $42.80 decline palladium futures are currently fixed at $1339.90. Both silver and platinum gave up over 2% in trading today. Silver lost $0.30 and is currently fixed at $14.68, while platinum futures closed at $869.50 a $22.50 decline.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action

We are currently flat with no active trades in gold or silver. However today's price declines certainly's favors the sell side of the market. See market forecast and view today's video report for a detailed analysis of today's move.

Gold Market Forecast

As anticipated the Federal Reserve left their benchmark Fed's funds rate unchanged. The initial release of the statement today was supportive of gold, however the press conference held by Chairman Powell resulted in gold and the precious metals complex pivoting to the downside resulting in a seven dollar plus decline in gold pricing, an almost 3% decline in the price of palladium.

Equities also reversed as Powell answered questions during his press conference.

All things being equal gold is now at the lower end of recent prices and very near a critical support level once again. On today's report we will detail what price point would trigger a sell signal in gold.

Sentiment Indicator:
Gold -> Neutral
Silver -> Bearish
Bitcoin -> Bullish