Gold off to rough start, it’s Fed Week

EARLY REPORT

The day got off to a rough start for gold with the metal trading down $11 at $1314, but this is to be expected. After all, it’s Fed Week and when the FOMC meets, it’s time to circle the wagons. Silver is also off in early trading – down 15¢ at $16.34. The talk is that the Fed could move from three rate increases to four before the year is out, but this is splitting hairs. That could happen or it could all change in a heartbeat should some unforeseen event or economic climate change suddenly intervene.

In the meantime, the markets will trade the perceived future as if it were reality, the algos will continue to spin out a high volume of one-way trades, and the gold market will suffer in the short term from trading linkages that may or may not hold up over the long run. For gold owners, it is a time to sit back and watch the show and do a little buying if you’ve been thinking about adding to your holdings on a dip. Quite often, Fed Week ends much differently than it begins.

Chart of the Day

Chart note: As we begin Fed Week, we thought it might be useful to post the overlay chart on gold and the effective Federal Funds rate. As you can see, since the Fed began raising interest rates in 2016, gold has tracked higher in concert with rising rates. Short-term trading, though it is the centerpiece of most reporting on the gold market, does not always reflect the long-term outcome.

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