Gold Up on weaker dollar – driven by Fed Dovish Tone

Yesterday Janet Yellen stopped short of predicting four rate hikes this year, weakening the dollar and treasury yields which in turn gave gold a Boost. She stated policy is not set in stone and is totally dependent on developing economic data.

When the news came out at 2pm yesterday, Gold investors took that statement as a buying opportunity. The gold market was very nervous that the Feds would announce an additional rate hike to four in 2017 and when the Chairwoman exhibited a dovish tone and indicated they are calling for only three, gold rallied $ 19.00 quickly. Nervous shorts ran for cover especially when broke thru the $1,215 level.

Retail sales are still weak and we all await on the next GDP results to be released on March 31st. So with growth in the economy still in question this gives doubt that her three rate hikes are a sure thing. This should support the price of Gold in this area and bring in new buyers into the fold.

The Chairwomen also said that its inflation target is still 2 percent and can vary on both sides of that number.

What doesn’t make any sense to me is how Ms. Yellen can call for three rate hikes this year and at the same time declare that future rate hikes will be data dependent. Maybe she has a crystal ball. I just don’t get it.

Gold this morning finding new investors pushing the price up over thirty dollars on the day.

The Dutch election didn’t go as the gold market hoped for, nonetheless Gold still looking strong this morning.

I expect this Gold rally to lose some of its steam as I believe you have seen the highs at $1,234 in the April futures contract today.

For the third day in a row, gold ETFs have seen inflows into the funds. Three day total increases by over 450,000 ounces.

Some Wall Street gold traders took it on the chin on this last move and for the ones I spoke to are out of the market for the time being.

What comes to mind is all the plans of the new administration to include the costs of infrastructure, military spending, replacing Obama care, tax cuts both corporate and individual, increased costs of entitlements as we see 10,000 baby boomers retiring every day. Where will we find the money to cover these “massive” expenditures without dramatically increasing the debt ceiling .

What baffles me is if this all comes into play inflation will be out of control and the Fed will be once more behind the curve trying to explain their position.

So, only time will tell how this plays out. In the meantime the next move in the gold market is anyone’s guess.

Have a wonderful Thursday.

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