Why Geopolitical Chaos Isn’t Moving Gold Prices
Why Geopolitical Chaos Isn’t Moving Gold Prices By Arkadiusz Sieron – SafeHaven
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Everyone focuses now on the chemical attack in Syria. Meanwhile, the most important turnover in the world remains mostly unnoticed. But we’re on guard. Let’s read our analysis of the key revolution of 2018 and find out the implications for the gold market.
Hawks Take Over the Fed
Are we going to write about Syria? North Korea? China? No. You already know everything you should about these geopolitical threats. The media bomb you with news about bombings, trade wars, nuclear trials, etc. But the key upheaval is taking place in silence, in the cool marble rooms of the Federal Reserve Banks. ‘The Hawkish Revolution’ – this is how the future historians will call it.
What is going on? We will tell you – but first read the key paragraph of the minutes from the recent FOMC meeting the Fed published yesterday.
Some participants suggested that, at some point, it might become necessary to revise statement language to acknowledge that, in pursuit of the Committee’s statutory mandate and consistent with the median of participants’ policy rate projections in the SEP, monetary policy eventually would likely gradually move from an accommodative stance to being a neutral or restraining factor for economic activity.
What does it mean? The FOMC members have started to consider the end of its accommodative stance. This is a real revolution, as the U.S. central bank has been supporting growth since the outbreak of the financial crisis. Now, for the first time since the Great Recession ended a decade ago, the Fed is talking about adopting a neutral or even tight stance. The possible consequences are enormous. More interest rate hikes are up ahead. Gold investors, be prepared!
Before we discuss the conclusions for gold, let’s analyze the rest of the latest minutes. Generally speaking, even without the remarks about possibly dropping the accommodative bias, the minutes had a hawkish tone. Why? Well, the FOMC members agreed that the nation’s economic outlook had recently strengthened: