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Published on April 9th, 2017 | by San Dee Doxtdator

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Fed jawboning kills gold and silver rally one day after each crossed their 200 day moving average

by The Daily Economist

Following last night’s U.S. missile attack in Syria as a punitive response for the perceived use of sarin gas against civilians, gold and silver both rose more than 1% to end overnight trading above their 200 day moving averages, and above hard resistance levels that had taken five months to recover to.

Gold:

Gold%2Bchart.jpg

Silver:
Silver%2BChart.jpg

Yet while these levels stayed above their 200 day moving averages for a few hours after U.S. markets opened, a sudden and mysterious move in the dollar and yen following some minor comments from NY Fed President Bill Dudley were enough to crush all the gains gold and silver had from last night, and end the week well below the resistance levels that could have opened up the next leg for gold and silver prices.
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It was not clear what was the catalyst for the sharp move, however shortly before the move Bill Dudley spoke, discussing the future of the Fed’s balance sheet: 

  • FED’S DUDLEY: RATES WILL BE PRIMARY POLICY TOOL, NOT ‘GRADUAL’ BALANCE SHEET REDUCTION
  • FED’S DUDLEY: PORTFOLIO RUN OFF WILL NOT BE ‘ACTIVE’ TOOL OF MONETARY POLICY
  • FED’S DUDLEY: ONE REASON TO SHED BONDS IS TO LEAVE OPEN OPTION TO EXPAND BALANCE SHEET IN FUTURE
  • FED’S DUDLEY: LIKELY WON’T RETURN TO PRE-CRISIS SIZE BOND PORTFOLIO
  • FED’S DUDLEY: PREFERS RETAINING CURRENT ‘FLOOR’ POLICY MECHANISM IN FUTURE, WITH PERHAPS $500 BLN – $1 TRLN IN EXCESS RESERVES
  • FED’S DUDLEY: REPEATS EXPECTS TO BEGIN SHEDDING BONDS LATER THIS YEAR OR NEXT YEAR

in which he pointed out that balance sheet normalization would likely lead to only a “little pause” in rate hikes to avoid concurrent policy moves. 

FED’S DUDLEY: SHEDDING BONDS MAY LEAD ONLY TO ‘LITTLE PAUSE’ IN RATE HIKES; PERHAPS AVOID SIMULTANEOUS POLICY MOVES – Zerohedge

 


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