Algorithms kick into high gear as the news on the FED decision hits the wires. Traders rely on these programs to position themselves to be first in line taking on a position as key words are released.
When the news was released that the Federal Reserve was raising the interest rate by .25% for the first time in 2016, we saw the dollar rally and yields on the ten-year going positive bringing the price of gold into negative territory.
Near-term risks are fairly balanced as they predict three rate hikes in 2017. One has to remember that in December last year, some FED presidents called for 5 rate hikes, but we didn’t get another none till today. The sceptics will argue that unless the economic data is compelling a rate hike is not in the cards first half of next year.
With treasury yields above 2.5 percent and a stronger dollar, one would have to believe the possibility of future rate hikes are in the cards giving gold the sell bias we see after the number. Maybe the market will settle down after the chairwoman gives her statement to the press. As I always say, I’ll wait for the market to absorb the news before taking a position.
Enjoy the rest of your day.
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