by Nico Isaac
Updated: June 14, 2017
Allow us to interrupt gold investors' regularly scheduled tailgate of the June 13-14 Federal Open Market Committee meeting for this very urgent message:
The question facing you today was never IF the Fed was going to raise rates this time around. The number-crunchers predicted a 93.5% probability of a hike.
The big unknown was "how much" of a hike and how determined Fed chairwoman Janet Yellen's would be regarding future policy. Say the mainstream pundits: a hawkish Fed is bearish for gold. To wit:
"Gold notches fifth straight day of losses as Wall Street prices in near certainty of a lift to US benchmark rates. Fed and other central bank jaw boning and hawkish sound frequently lead to gold weakness." (June 13 MarketWatch)
While a dovish Fed is bullish for gold --
"Gold turns higher as soft economic reports raise doubts on outlook for Fed policy. The reports aren't seen delaying a likely Fed hike Wednesday, although could frame the conversation on the aggressiveness of Fed policy moving forward." (June 14 MarketWatch)
There's just one problem with this argument; namely, it isn't exactly accurate. Alas, we stand before you with the following 15-year price chart of gold, alongside every major Fed monetary policy initiative over the same period.
Look closely, and the truth becomes clear: Hawkish policy isn't bearish for gold; while dovish policy isn't necessarily bullish, either. Under the chart is a more elaborate explanation of each policy measure:
The evidence is undeniable. Gold prices are not led by the Fed. There's a much larger force at play, driving the precious metal's trend. We believe it is investor psychology, which unfolds as Elliott wave patterns on gold's price chart.
Intraday, Daily, Weekly, Monthly -- whatever your time frame, our Metals Pro Service analyst Tom Denham stays ahead of gold's coming trend changes.