By Treasure Coast Bullion Group -

Gold Prices Surge This Week

The Fed Raised Rates but Projected a Mixed Forecast

The US Durable Goods Orders Were Stronger than Expected



Gold prices surged higher this week, driven by concerns over a trade war, and the relief that the Fed was likely to raise interest rates by only 50-basis points during the balance of 2018. While the Federal Reserve signaled that they would likely increase rates more than expected in 2019 and 2020, the 2018 number was unchanged. In the aftermath of the announcement, longer- supply side term U.S. yields moved lower, as it appears that the market believes the Fed is off based on its assessment and too hawkish. This paved the way for a softer U.S. dollar and higher gold bullion prices.



New Fed Chair Powell’s First FOMC Meeting

Chairman Powell sat in the hot seat after supervising his first Federal Open Market Committee, FOMC meeting following the well discounted first hike of the year. The growth outlook was boosted considerably, though the language in the statement was tweaked only modestly, as the Fed still seems comfortable signaling a gradualist tightening path. The inflation outlook was boosted modestly. The dot plot estimates for the Fed funds rate were nudged upward despite the unchanged median of three hikes in 2018, though with higher 2019-20 median levels, leaving a steeper trajectory.

Despite the increase in the rate forecast for 2019 and 2020, Powell wasn't particularly hawkish in his press conference. He was asked about the still rather subdued inflation outlook despite the large increase in the growth outlook. And he played down, to some extent, the upward shift in the dot plots which track future rates, noting that they are just individual views of the 15-member FOMC.

Powell on Stimulus Effects

Powell stated that FOMC participants see a meaningful increase in demand from fiscal policy and especially tax cuts. He also noted there could be supply-side effects as well, with higher investment helping drive productivity higher. But he qualified, noting it's all very uncertain. He also stated supply-side effects should take longer to appear and will be less certain. On a possible trade war and retaliation, he noted it's a new risk, but a low profile one. He said that the Fed doesn't do trade policy and wouldn't comment on individual country's actions.

Durable Goods Was Stronger than Expected

The U.S. Durable Goods Report revealed a larger than expected defense and transportation-led 3.1% February orders surge with a hefty 1.2% ex-auto increase, after modest upward revisions to nearly all of the component figures for January. There were large equipment and shipments gains that reversed two lean reports for those figures, and a solid 0.4% inventory gain. The report should boost Q1 GDP forecasts as there was a 7% growth rate for equipment spending after an 11.8% Q4 clip. There should be an approximate $23 billion Q1 inventory addition that leaves a $38 billion in the accumulation rate.

Libor is Generating Fear Buoying Gold Prices

U.S. 3-month London Inter-bank Offered Rate (LIBOR) surged to a fresh 9-year high of 2.27% following the Fed hike this week and the increase in the trajectory of future fed hikes in 2019 and beyond. This was accompanied by an increase in the 3-month LIBOR/OIS spread which measures the borrowing rate versus treasuries, to the widest level since May 2009. Libor will eventually be phased out, but it is still the benchmark for inter-bank borrowing on a short-term basis. This might be a signal that credit markets are beginning to teeter which is keeping gold prices buoyed.

If you believe prices are poised to make a move and you are looking to take advantage of a time to add precious metals to your portfolio, click on this link to get access to your Investment Kit or better yet, give us a call today at 800–982–6105.

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Good Investing,

Treasure Coast Bullion Group







