Federal Reserve Bank of Atlanta President Dennis Lockhart said yesterday that the U. S. Financial markets may be underestimating the odds of a central bank rate increase in June. Investors currently predict the FED will raise rates only once this year, and see only a 13 percent chance of a hike in June, according to an analysis of Fed fund futures by the CME Exchange. By the way, currently Dennis Lockhart is not a voting member.
Right after the Fed meeting in June comes the vote on whether Britain will leave the European Union in a national referendum. I’m sure the folks at the FED will be watching this closely. Britain is the EU’s second largest economy and no one really knows what the impact will be in the event they turn their backs to the rest of the EU.
This all came about when British Prime Minister David Cameron made an election promise to negotiate a better deal for his country in the EU to unite the left and right in his conservative party. The influx of migrants all over Europe is on all the minds of the British population and will have a direct effect on how that vote goes.
Whether its news over the pond, or in the Far East or here in the states, all the economies are connected. And one must remember that global interest rates and currency valuations have a direct impact on the price of gold.
Case in point. Yesterday the dollar index traded below 92 and hit a low of 91.91 before technical indicators kicked in, indicating the dollar index was oversold. Subsequently, buying came in and propped up the dollar and gold sold off. This morning at the time of this report gold is trading at $1,286.00 and the dollar index has rallied to a high of 93.28 in today’s trading. Nonetheless, even with the price of gold down $3.00 from yesterday’s close, gold continues its bullish tone.
Another bit of news worth sharing is that the holdings in SPDR Gold shares, the world’s largest exchange-traded fund backed by gold, increased by 20.8 metric tons yesterday, the largest one day increase since 2011.
Have a wonderful Wednesday.
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