It is inevitable that the precious metal markets will be influenced right after comments of any FED governor. This morning after a quiet Far East trading session overnight, we hear comments from San Francisco Fed governor Williams, who is calling for 2 to 3 rate hikes in 2016 and 3 to 4 rate hikes in 2017. So, if I can translate that language, that means by the end of 2017 we could see a Fed fund rate of 2 percent?
These comments give the gold market sell signals and chases any nervous long-term investors from holding on to their positions.
This Friday Janet Yellen will be honored at Harvard University with the Radcliffe Medal, presented annually to an individual who has had a transformative impact on society. Right after the ceremony Gregory Minkiw, the Robert M. Beren Professor of economics at Harvard University, will has a sit-down conversation with the FED Chairwomen to discuss her ground-breaking achievements. It is my hope that in that conversation she will bring some stability to these unsubstantiated comments made by her colleagues.
I guess no one at the FED is reading the newspapers or going online to see what’s going in Europe? The Germans and the French are closely watching the possibility of England leaving the EU. Many are screaming, as seen in the French media last week that France and Germany must find a way to strengthen the Euro, otherwise the future of the EU could be in jeopardy.
In my opinion this uncertainty will strengthen the U S dollar and will delay the FED’s ability to raise rates.
In the short term, as more and more comments of a rate hike are shared in the media by Fed governors, gold will have a continued sell bias to deal with.
Author Name: Walter Pehowich
Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.