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Gold Resists Fed Chair
Adam Hamilton
Since Powell’s pressers can really move markets, I watch all of them live in my line of work. Hearing him all but rule out a March rate cut was stunning! All that was pretty-darned hawkish, hammering March rate-cut odds to 38% and leaving 2024 expected cuts near 141bp. Emphasizing how serious a hawkish surprise that was, the flagship S&P 500 stock index plunged 1.6% into close on the Fed chair’s comments!
That easily could’ve lit a fire under the US dollar and crushed gold. While the latter did fall from $2,045 just before Wednesday’s FOMC decision to $2,037 on close, that still made for a slight 0.1% gain across a quite-hawkish FOMC! And the US Dollar Index only climbed 0.2% to 103.6, merely revisiting its bounce high hit over a week earlier. Gold had resisted the Fed chair despite being mired in bearish psychology!
Post-FOMC market reactions often aren’t fully apparent until the end of the subsequent trading day. That gives overseas traders time to react overnight, and American traders more time to digest the implications of whatever the Fed did. At noon Thursday as I pen this essay, gold had surged 1.1% near $2,060. And the USDX had dropped 0.5% around 103.1. Neither were responding as usual to a hawkish Fed surprise!
Gold’s impressive counter-Fed rallying this week could prove an important psychological inflection point. Gold’s latest surge despite a big hawkish surprise ought to help convince gold-futures specs this young upleg still has lots of room to run. That will motivate them to pile back into longs, amplifying gold’s gains. As its upleg resumes powering higher on balance, the resulting new records should attract lots of new traders.
