• 4 days Quantum Computing Is The Newest Megatrend In Silicon Valley
  • 5 days How To Invest In The Cybersecurity Boom
  • 7 days Investors Are Patient With Unprofitable Giants
  • 9 days Wells Fargo Back In The Scandal Spotlight Once Again
  • 11 days 5 Stocks To Keep A Close Eye On This Year
  • 12 days As Auto Giants Flail, Look To Chip Stocks For Gains
  • 13 days Central America Is Ready For The Bitcoin Hustle
  • 15 days China’s Video Game Restrictions Unlikely To Slow Down Booming Industry
  • 16 days Top Performing Stocks As Inflation Fears Grow
  • 17 days US Airline Stocks Take A Beating On New EU Restrictions
  • 18 days This IPO Could Open Sustainable Fashion Floodgates
  • 19 days Crypto Crime Nets Another $2B Fraudster
  • 21 days This Week’s Hottest Meme Stocks
  • 22 days Why World Markets Should Be Watching Germany Closely
  • 24 days Could ‘Cultured’ Meat Rival The Plant-Based Megatrend?
  • 27 days ‘Easy Money’: Crypto Is Still Attracting Newbie Investors
  • 28 days Foreign Syndicates May Have Stolen Up To $400B In COVID Benefits
  • 29 days Gold Jumps Above $1800 Ahead Of Jackson Hole Summit
  • 29 days International Banks Blacklist Afghanistan Following Taliban Takeover
  • 31 days China’s Tycoons Are Getting A Serious Reality Check
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

Dan Norcini

Dan Norcini

Dan Norcini is a professional off-the-floor commodities trader bringing more than 25 years experience in the markets to provide a trader's insight and commentary on…

Contact Author

  1. Home
  2. Markets
  3. Other

Sea Change in the Fed Swamps Gold

WOW! I know no other way of saying it than to say that the Fed took everyone by surprise. I certainly did not expect this Fed, this timid FOMC, to sound such a hawkish note.

As dovish as Draghi and the ECB sounded last week, the Fed sounded hawkish this week. Talk about a sea change in attitude!

Needless to say, the market reaction, especially in gold and in the currencies, is that a December rate hike is coming. Now, before we all get absolutely giddy, we still need to see the November and the December payroll numbers.

That being said, with the entirety of the market leaning to the NO RATE HIKE THIS YEAR side, all it took was a NOT DOVISH note to upset the entire apple cart.

In gold, every single trader who bought into this rally expecting a dovish Fed, is now running for their lives. Just as the bears were terrified prior to the Fed meeting and were exiting this AM, this afternoon it is now the bulls who are terror-stricken.

I want to see how the market closes later on today to get a sense of what is coming next. Suffice it to say, IF and this is an enormous "IF", the Fed is actually going to hike rates this year, then it is hard to see gold going anywhere but down as this is going to lend tremendous support to the US Dollar.

I am not sure what has been happening behind the scenes with the Fed as it was a given that they have been concerned about overseas development and particularly the strong Dollar which has been exerting downward pressure on the commodity complex.

I have written in the recent past that the Fed does not want sinking commodity prices - at least commodity prices falling so low that they impact jobs in those industries which produce or deal in them - since that is a deflationary signal and works at cross purposes to their desire to achieve a 2% rate of inflation annually.

How we get there from here, with a surging US Dollar, escapes me.

Maybe the Fed sees something on the payrolls front that we do not as of yet see.

What is really strange about this is that if the Fed indeed did not want the US Dollar to surge higher, one would have thought that the ultra dovish Draghi/ECB comments, alongside the Chinese devaluation of the Yuan, would have been enough to keep the tone in the statement dovish.

Apparently not.

Now what? Well, the market has to ONCE AGAIN (SIGH!) adjust to the Fed comments so that it now reflects a hawkish stance instead of the previous dovish stance that existed until as recently as 1:00PM CDT!

It certainly makes me wonder if the Euro is going to take out 1.090 and head down for a test of 1.085.

Euro Daily Chart
Larger Image

I can tell you from a TA perspective, if the Euro fails to hold above 1.080, odds favor it moving down to 1.060 and possibly even the ECB/QE induced low near 1.045.

As a currency guy, what incentive does one now have to buy the Euro with the tone of both Central Banks being what it now is??

 

Back to homepage

Leave a comment

Leave a comment