Gold surges as Bank of England mimic the Fed, indicating both central banks are in no rush to raise rates

Gold pricessurged in trading as the Bank of England joined the central bank of the UnitedStates, expressing that they were not in favor of raising interest rates at anytime in the near future. During Chairman Jerome Powell's press conferenceyesterday, he made it clear that they're not even thinking about, thinkingabout raising rates anytime soon. In terms of traders' reaction to the chairman'sstatements indicating that they have no set timeline in which to initiate lift-off,I believe what we witnessed today in gold was a delayed reaction coupled withthe confirmation that the Bank of England was on the same page.

As of 5:50 PMEDT gold futures basis, the most active December 2021 contract had a robustgain of 1.65%, or $29.10. Currently, December gold futures are fixed at $1793.Today's gains reversed the decline in gold yesterday when gold dropped by over$20 per ounce. While it is clear that the announcement by the Bank of Englandsupported the recent announcement by the Federal Reserve not to addressinterest rates, it seems more plausible that today's gains were a delayedreaction as market participants absorbed yesterday's comments by ChairmanPowell as well as facts contained within the statement released immediatelyfollowing the conclusion of the FOMC meeting.

Withoutoffering a timeline, the Federal Reserve's FOMC statement talked about thenecessary triggers before interest rates would be raised. In essence, thecriteria are the completion of their dual mandate, which is maximum employmentand inflation target at approximately 2%. Yesterday's FOMC statement laid outthe necessary criteria needed for the Federal Reserve to announce a timeline onlift-off, or interest rate normalization.

"TheCommittee seeks to achieve maximum employment and inflation at the rate of 2percent over the longer run. With inflation having run persistently below thislonger-run goal, the Committee will aim to achieve inflation moderately above 2percent for some time so that inflation averages 2 percent over time and longer?EUR'term inflation expectationsremain well anchored at 2 percent. The Committee expects to maintain an accommodativestance of monetary policy until these outcomes are achieved."

In regards toleaving interest rates (Fed funds) unchanged, the statement read as follows;

"TheCommittee decided to keep the target range for the federal funds rate at 0 to1/4 percent and expects it will be appropriate to maintain this target rangeuntil labor market conditions have reached levels consistent with theCommittee's assessments of maximum employment and inflation has risen to 2percent and is on track to moderately exceed 2 percent for some time."

Lastly, theyannounced that they would begin the tapering process reducing their monthlyasset purchases by $15 billion per month. The $15 billion monthly reductionswould include a $10 billion reduction per month in U.S. debt and a reduction of$5 billion monthly in mortgage-backed securities. However, there was a largecaveat to that statement as the statement said;

"TheCommittee decided to begin reducing the monthly pace of its net asset purchasesby $10 billion for Treasury securities and $5 billion for agencymortgage-backed securities. Beginning later this month, the Committee willincrease its holdings of Treasury securities by at least $70 billion per monthand of agency mortgage?EUR'backedsecurities by at least $35 billion per month. Beginning in December, theCommittee will increase its holdings of Treasury securities by at least $60billion per month and of agency mortgage-backed securities by at least $30billion per month. The Committee judges that similar reductions in the pace ofnet asset purchases will likely be appropriate each month, but it isprepared to adjust the pace of purchases if warranted by changes in theeconomic outlook."

Afteranalyzing the FOMC statement very carefully, many analysts including myself,see that the Federal Reserve is keeping all of its options on the table,including the level of tapering, and more importantly not even suggesting anykind of timeline for lift-off until the criteria that they have laid out hasbeen met.

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Wishingyou, as always, good trading and good health,

By Gary Wagner

Contributing tokitco.com

Follow @garyswagnergary@thegoldforecast.comwww.thegoldforecast.com Disclaimer: The views 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 accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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