Hawkish Fed Narrative Accelerates Before Blackout Begins on Saturday

Gold Futures Break Below $2000

The volatility that led to diminished bullish market sentiment for gold has returned as gold futures broke below $2000.This morning in New York traders witnessed a quick and powerful price drop from the open and high at $2016. Today gold traded to a low of $1982.30 and as of 4:45 PM EST gold futures basis the most active June 2023 contract is down $25.80, or -1.27 %, and fixed at $1993.40.

The dollar again had very little input in today’s price gains in gold with the index off fractionally by -0.12 % and fixed at 101.445.

Federal Reserve Officials on Interest Rates

All week Federal Reserve officials have expressed a resolute narrative conveying that the need for taking interest rates higher remains. This includes an additional rate hike of ¼% in May. According to the CME’s FedWatch tool, there is an 85.7% probability that the Federal Reserve will raise rates by ¼% at the May FOMC meeting. More so there is a 25.4% probability that the Fed will raise rates again at the June FOMC meeting which would take the Fed’s terminal rate to between 5 ¼% to 5 ½%.

Federal Reserve officials will go silent on Saturday, April 22. The blackout period will remain in effect until the May FOMC meeting has concluded, and a statement is released which will be followed by a press conference with Chairman Powell.

Now another Fed official has expressed the need to continue to raise interest rates. Yesterday Federal Reserve Governor Michelle Bowman said that “more work needs to be done to tame inflation”.

This is yet another Federal Reserve official that has spoken out in favor of a rate hike including New York Federal Reserve President, John Williams, Fed Governor Christopher Waller, and Federal Reserve Bank of St. Louis President James Bullard.

Impact on Gold Prices

The combination of multiple Fed officials expressing a singular narrative has finally impacted and changed the assumption by many market participants of a potential pause in rate hikes. This could be the underlying reason that gold prices broke back below $2000 per ounce.

For those who would like more information simply use this link.
Wishing you as always good trading,
Gary S. Wagner