Gold was dragged through nearby support around $1260, as silver continues to get pressured. Silver fell below $17 in earlier trading and is presently engaged in a challenge of the 16.80 low from March.
The headline numbers for today’s economic releases were generally disappointing, although there was a rather significant upward revision to February construction spending that may positively influence Q1 GDP revisions. Nonetheless, weak growth and the evaporation of inflationary pressures suggest it’s going to be increasingly difficult for the Fed to justify further rate hikes.
The two-day May FOMC meeting begins tomorrow. While the Fed is not expected to adjust policy at this meeting, the statement to be issued on Wednesday could be interesting. I’m specifically curios to know if they make mention of those diminished price risks and the dismal sub-1% growth in Q1.
Fed funds futures suggest that the prospects for a June rate hike have edged lower, but they’re still above 60%. If the Fed does hike rates in June — barring any significant change to the economic picture — one might reasonably interpret their main goal as being to temper the stock market rally. And secondarily, to give themselves sufficient clearance above the zero-bound to offer a couple of rate hikes should the inevitable recession rear its ugly head.
Influencing the stock market is not really part of the Fed’s mandate. Of course, everyone realizes that’s exactly what they do.