Welcome to the Super Bowl of all rate hike decisions. It’s been almost a decade since the last rate hike in interest rates and today at 2pm EST we will find out the FED decision.
With the majority of economists and Wall Street traders believing a rate hike is a done deal, the focus shifts to the language going forward. Is this a one and done rate hike, or are more rate hikes in our future? Algorithm programs are in place to react to key words in the language the Fed releases and can have a significant impact on all markets. I encourage you all to watch the action at 2pm. I think you’ll find it very interesting as these events can cause wild swings in prices.
No one knows for sure what the FED will do in 2016. Some economists believe once the FED gets started raising rates, three or four rate hikes in 2016 are in order, but it’s my belief that Janet Yellen is so conservative that she will indicate that any future rate hikes will be dictated by market data and will refuse to commit to showing her hand.
As I reported to you in my last comment, many Wall street traders expect a break out of the recent trading range in gold as the Fed decision is released. In the small chance that they postpone a rate hike, I expect Gold to have a strong short covering rally to the upside. If the language reveals more rate hikes are in the cards, I expect an immediate sell off in Gold will occur. Watch for key words that will indicate future FED decisions. These key words will have an immediate effect in the price of the Gold, up or down.
As of the time of this report, we see Gold up on the day as traders cover their short positions ahead of the Fed decision. Dollar index and the Euro close to unchanged at the moment, also awaiting the 2 o’clock decision.
Higher rates are applauded by Seniors who have been forced to look to the risky stock market for a return on their cash. Homeowners with adjustable rate mortgages as well as folks with credit card debt are hoping the FED stays put. These Fed decisions have a major impact on all of us as we hold our breath as the data is released.
If you are looking for me, I’ve decided to have a tailgate party outside the FED office building this morning so I can get the decision first hand. Hot dog anyone?
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.