Precious Metals Quiet This Morning Ahead of Fed Decision

The Market Gage - Dillon Gage's Precious Metals Newsletter

Metal markets are quiet this morning ahead of the Fed decision at 2pm EDT today. With little chance of a rate hike this afternoon, the market awaits to hear the comments from the Fed committee. With all the encouraging economic data of late, we expect the committee to express a hawkish tone which would increase the chance of a rate hike in September. I still believe that even with some encouraging economic data, the Fed will be hard pressed to raise rates anytime this year with the rest of the world’s economies struggling at best.

Equities continue their dominance over all markets as investors continue to increase their holdings.

ETF Gold and Silver holdings declined overnight as some investors get impatient and decide to take some profits off the table.

Market participants awaiting the results from the Bank of Japan’s meeting that starts tomorrow. Reuters news service reports that they expect the Bank of Japan to expand its asset purchases and cut rates further below zero at their two-day meeting that ends Friday. Not much help to some Fed presidents here who continue to put pressure on the chairlady to raise rates.

Unless there is an unexpected surprise by our Fed committee or the Bank of Japan, I expect a continued consolidation going forward in the price of gold and silver. In the event that one or the other group throws the market an unexpected curve ball, I expect the market will react violently, so please keep a close eye on the news reports.

For my readers who are not familiar with the terms used by the media to explain the mood of the Fed committee, here is how it is described.

  • A Hawkish tone from the Fed indicates that they are considering tightening monetary policy in the wake of higher expected inflation, a sign of potential increases in the fed funds rate.
  • A Dovish tone from the Fed indicates that they are considering loosening monetary policy due to the economy growing, a sign that interest rates will be cut or more quantitative easing is expected.

Tightening monetary policy is done by selling treasury securities, taking money out of circulation and driving interest rates higher , where as an easing of monetary policy can be achieved by buying government securities.

Have a wonderful Wednesday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisors with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.