Precious Metals Quiet This Morning Ahead of Fed Decision

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.