The price of gold extremely volatile as Yellen’s comments hit the wires.
CME Fed watch tool which predicts a possible rate hike at the next Fed meeting in September dropped after her comments from a 21 pct. chance of a rate hike to 18 percent rallying gold and equities.
- Solid growth in household spending
- Fed needs to retain new tools from crisis
- Fed has tools to fight the next recession
- Interest on reserves to play a key role for years
- 2 trillion QE could fight next recession
- Anticipated gradual rate hikes appropriate if data suggests
- Fed should research price level targets
It’s the same old story with a twist. The Fed always wanted to have a cushion to cut rates in the event that the economy takes a turn for the worst. That’s why many of the voting members wanted a rate hike. Now it seems that they are in better position to fight a failing economy, so it’s not so urgent to raise rates because of the tools available to them now.
So, if you read between the lines and interpret what she meant, in my opinion, it was to give the market a signal that all is well, but not great with the economy and we will not raise rates unless the data is convincing, Period.
In turn gold is up $ 20 dollars after being slightly negative as her comments were being released.
Have a wonderful weekend.
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