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Fed Spooks Markets But Gold Price Steadies

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Fed Spooks Markets But Gold Price Steadies

The gold price held around $1,328/oz after markets reacted to a more hawkish tone from the Federal Reserve.

Platinum was up modestly from yesterday's losses but traded at $990/oz.

The silver price likewise recovered to $16.57/oz.

Palladium was the best performer among the metals, surging 1.3% to $1,025/oz.

Hawkish Fed Sends Stocks Lower

stock market © Jan Miks | 123rf.com

Yesterday's FOMC meeting minutes suggested the U.S. central bank would raise interest rates more aggressively in 2018.

Investors quickly shifted to a risk-off posture in anticipation of more interest rate hikes. Stocks fell by Wednesday's close, and the slump carried over into Thursday morning.

Wall St closed down about 0.5% Wednesday. Tech stocks continued to outpace the rest of the market.

Equities in the U.S. looked to rebound after two straight days of losses to start the week.

European indices were down as much as 1% during Thursday's session but pared earlier losses.

Meanwhile, the U.K. and EU continued to struggle over the terms of Brexit.

Japanese markets were sharply lower overnight, but the Shanghai Composite rallied better than 2% on its first day of trading after the Chinese New Year. Shares in Hong Kong sank 1.5%.

A stronger currency influenced the downturn for Japanese stocks. The yen jumped 0.9% to ¥106.8 per dollar.

The euro gained 0.35% to just above $1.23. The British pound was unchanged at $1.39. Consequently, the U.S. dollar lost 0.2% to 89.8 on the DXY index.

Bond Market Also Responds to Interest-Rate Forecast

Another effect of the more hawkish stance from the Fed has been a selloff in government bonds.

Demand for bonds is falling around the world as the likelihood has increased that central banks will follow the Fed and begin to normalize policy.

Investors are adjusting after a decade of extraordinarily accommodative measures in monetary policy. This support from central banks may be nearing an end.

The Federal Reserve is forecasting continued strong economic growth, which points to higher interest rates.

That in turn means bond yields are poised to rise.

The 10-year yield on U.S. Treasurys was up three basis points to 2.92%. It had been as high as 2.95%.

In other economic news, weekly jobless claims fell modestly to 222,000, according to the Department of Labor. This was below what analysts had expected.

It marked a five-week low in new claims for unemployment benefits.

The seemingly robust job market is another factor that will likely encourage the Fed to raise interest rates faster.

Commodities were mostly flat despite the weaker dollar. Crude oil prices traded just above unchanged, with WTI crude and Brent crude each up about 0.3%.

Bitcoin fell back below $10,000 for the first time since last Friday.


The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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