Why I'm still long gold post FOMC
Fed's powerful support underwhelms
Good morning one and all! This is an update to my post yesterday on my gold longs pre-FOMC.
The FOMC were dovish yesterday committing to keep policy accommodative for as long as it is necessary to bring the hardest hit US workers back to work. The dot plot had officials seeing US rates ultra low right through 2023 and there is more fiscal stimulus anticipated to bring the 11 million US workers out of work back into the labour market.
Also, of interest, the FOMC made hiking conditional on inflation topping 2% as well as achieving maximum employment. To hit one of those targets is an achievement. To hit both is uber good. In the Global Financial Crisis the Fed kept rates pinned low for 7 years from late 2008 through to 2015. Gold prospered in that period.
So, the FOMC kept the medium term picture in place for a gold bull position and were dovish. Although we are seeing some USD strength as they were not seen as 'dovish enough' the environment for gold still looks conducive. Low interest rates, high levels of QE, record levels of gold etf's all lead me to 'hold gold'. I will update the Forexlive readership with how I play gold out.
But, don't worry, in case of higher rates emerging I have an exit plan pictured below ;-)