Federal Reserve kicks off stopwatch at FOMC meeting this month – .

Federal Reserve kicks off stopwatch at FOMC meeting this month – .

For the first time since the onset of the global pandemic, which began in March 2020, the Federal Reserve has taken dramatic action to prevent the economy from collapsing and then create an accommodating monetary environment for the economy to recover. once vaccine deployment has started. However, over the past year and a half, the Federal Reserve has remained extremely nebulous as to when it will begin to unwind the current interest rate which is close to zero, as well as its 120 asset purchase program. billion dollars a month in mortgage. -securities backed by US debt securities.

Asked at previous FOMC meetings about their timeline to start cutting or raising interest rates, they replied that it depended on the data and that it was not even time to start discussing the policy pullback. current monetary policy. Everything changed this week when the FOMC meeting convened and released its statement. He set a different tone and started the clock with a rough timeline as to when they will hike rates (with two rate hikes set for 2023). They also acknowledged that they had started talking about phasing out. It is now widely accepted by analysts that we could see some decrease as early as March 2022, with a series of two rate hikes in 2023.

This triggered a virtual collapse in financial markets, including the Dow Jones, as well as commodity markets, with precious metals markets being hit extremely hard. None of the precious metals has been immune to liquidation, with gold, silver, platinum and palladium all losing ground in the past three days of trading. Palladium, for example, has dropped $ 339 in the last two trading days and with today’s drop of $ 47.70 it is currently pegged at $ 2,464.50. That’s a drop of 11.964% in two trading days.

Gold futures are based on the most active April 2021 Comex contract which traded at a high of $ 1,865 on Wednesday, and after factoring in today’s $ 10 drop. hui, it is currently pegged at $ 1,764.40 out of $ 100 of losses accumulated over the last three trading days. While the strength of the dollar had a definite influence on the fall in gold, it was the selling pressure from market participants that had the biggest impact on this week’s losses.

For the third day in a row, the US dollar index has gained tremendous value and is now pegged at 92.32. The dollar has gained nearly 2% (1.97%) in the last three trading days, and a gain of around 2.2% year-to-date explains almost all of the dollar’s strength. this year.

Key to this dynamic shift was that for the first time since the start of the pandemic, the Federal Reserve announced a nebulous timeline, but a timeline nonetheless, in essence, starting the countdown or clock until when the Federal Reserve will begin to roll back components of its very loose and accommodating monetary policy.

Increased selling pressure was added today when Fed Voting Member James Bullard Chairman of the Federal Bank of St. Louis said he expects central banks to raise their benchmark rate Fed funds in 2022. In an interview with CNBC today, James Bullard said it was “natural for the Fed to tip hawkish at its meeting earlier this week given recent inflation readings strong “.

While it is still unclear when the Fed will start to reverse some of its aggressive monetary positions, the first steps in building transparency and educating the public. They started the time by announcing their intention to cut current accommodative interest rates and quantitative easing and have fulfilled the possible timelines envisioned. This month’s FOMC meeting was unlike any other FOMC meeting in the past year and a half, and like it or not, the Federal Reserve has clarified a rough timeline for the first time since start of the pandemic more than a year ago.

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Wishing you, as always, good exchanges and good health,

Warning: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. This is not a solicitation to trade in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for any loss and / or damage resulting from the use of this publication.


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