Waiting on the Fed

There is a muted silence in the trading pits as gold futures are currently trading up $.30, with the most active April Comex contract currently fixed at $1303.20. Traders and market participants are awaiting the beginning of this month’s FOMC meeting, which will commence on Tuesday and conclude on Wednesday of this week.

Although current expectations are that the Federal Reserve will leave interest rates where they are, there are some major topics that could be revealed in the statement which will follow the conclusion of this month’s meeting. ‘

Of course, the two major topics of interest will be the release of an updated “dot plot”, as well as information regarding “how and when” the Federal Reserve will liquidate their massive balance sheet.

As reported in MarketWatch today, Larry Meyer, a former Federal Reserve Governor in a note to his clients said “The market has high expectations for specific details on when and how the Fed will end runoff. Falling short of those expectations—for example by merely reiterating that it is discussing runoff plans and the timing has not been finalized—would be a big disappointment and endangers the benign market conditions that the Fed has contributed to since the December volatility.”

For the last eight years the Federal Reserve has been releasing their “dot plot “which has their current plans for interest rate hikes. It contains information as to the number of planned interest rate hikes during the calendar year, as well as their expected rate for the Fed funds rate will.

This will be the second time this year the Federal Reserve has met. In January, the they met for the first time and at the conclusion of that meeting did not release an updated dot plot. Statements made by Fed chairman Jerome Powell revealed a more dovish stance than the prior year. In December 2018, the Federal Reserve’s “dot plot” had outlined the possibility of two rate hikes in 2019, with a few members penciling in five rate hikes by the end of 2020.

The statement released on Wednesday should contain important details about the Federal Reserve’s plans for their balance sheet liquidation as well as the anticipated number of rate hikes this year.

As such it is likely that both gold and the U.S. dollar will continue to trade in a muted fashion up until the FOMC meeting concludes on Wednesday and the release of the Federal Reserve’s monetary policy statement.

Wishing you as always, good trading,