Fed Raises; Gold Swoons, Gold Rises; Pattern Repeats
(Kitco News)- Gold traded as we expected after the Fed raised ratesyesterday -- first a swoon on theannouncement and then a pop. This has been the pattern for the last three ratehikes. Although the message from the Fed was hawkish,indicating further rate hikes this year, traders ignored the statement andbegan focusing again on global issues, specifically the looming trade wars.There is a consensus building that an acceleration of trade friction will benegative for global growth, which may make the Fed's hawkish statement a mootpoint. The focus will be on President Trump's decision on moving forward withChinese tariffs, due to take effect tomorrow. On this point, we are lessworried, at least while talks with North Korea remain ongoing. The U.S. needsChina, if a North Korea deal has any chance of success,and the president may defer implementationof the actions against Chinese goods. The ECB has left rates unchanged andindicated that asset purchases will end by year-end. Watch the China story. IfTrump backs off, gold may run into selling. The $1,297 level indicates supportand a break above the 200-day moving averageat $1,307 will generate the momentum for a sustainable rally.
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