The Daily Market Report: Gold Narrowly Confined Ahead of FOMC Statement

29-Jul (USAGOLD) — Gold is narrowly confined going into today’s FOMC policy statement. That statement will come out at 2:00PM ET.

Given the ongoing unevenness of U.S. economic data, there’s probably not much incentive for the Fed to materially alter the verbiage in the statement. The implication will be that the Fed remains on track for a small rate hike sometime before the end of the year, contingent on the data leading up to that point.

The Fed may express some more optimism about the labor market given some improvement in the headline numbers on that front. However, Ms. Yellen has already acknowledged that NFP, the unemployment rate and claims data don’t tell the whole story.

The inflation outlook on the other hand is much more clear cut. It remains well below the Fed’s target of 2%, with little to suggest there will be upward pressure on prices anytime soon. In fact, the inflation outlook has deteriorated markedly in recent weeks, exacerbated by rising growth risks in China.

Wages were mentioned less than ten times in June Fed minutes, while inflation received 110 mentions — @popdemoc

— Pedro da Costa (@pdacosta) July 29, 2015

The juxtaposition of the jobs and inflation outlooks prompts Wall Street Journal FedWatcher Jon Hilsenrath to says this “potentially sets up the Fed and markets for a cliffhanger policy meeting in September.” In other words, a September lift-off is hardly a sure-thing; and that’s even before factoring in the uncertainty associated with China and Greece.

Uncertainty associated with Greece you ask: Wasn’t that problem kicked down the road? Hardly.

When the Greek Parliament agreed to austerity measures 2-weeks ago, it was merely a requirement before actual negotiations for the country’s third bailout could begin. Those negotiations apparently are not going so well. Creditors are reportedly asking for further concessions, but PM Tsipras is saying he won’t promise anything beyond was already been agreed to.

Meanwhile, Tsipras is apparently having a hard time whipping a large portion of his party into line. An emergency meeting of the ruling Syriza party has been called and the PM is already issuing threats of a snap election. A new election would threaten to set back, or completely undermine any progress toward that next bailout.

With Greece’s next big bond payment due on August 20, there’s not much room for further messing around. And let’s be honest here: Even if the third bailout is secured, the Greek problem isn’t really resolved. It’s just punted a little ways down the road.