Gold drops 2% in trading after FOMC decision to keep rates steady

Risk Warning: The information in this article is provided for general informational and educational purposes only. It does not constitute investment advice, a personal recommendation, an offer, or a solicitation to buy or sell any security, financial instrument, or product. Investing in equities, indices, ETFs, commodities and other financial instruments involves a significant risk of loss and is not suitable for every investor. Past performance is not a reliable indicator of future results. Cryptocurrencies and digital assets are highly volatile, may be unregulated in some jurisdictions, and can lose value rapidly and without warning.

The price of gold dropped 2% in trading after the FOMC’s decision to keep interest rates steady, as Kevin Warsh refuses to provide future guidance on what possible decisions for handling rates will be. 

American assets ended in the negative on Wednesday alongside gold with the following indices losing value. 

• S&P500: -1.25%
• NASDAQ: -1.01%
• Dow Jones: -0.99%
• Russell 2000: -0.75%

Thursday’s trading data picked up on a brief rally for stock indexes such as the DOW futures, S&P futures, and NAS futures picked up by 0.55%, 0.84%, and 1.38% respectively. 

Asian stock indexes showed a mixed market outlook with some indexes performing well and some performing poorly. Large-cap Indian and Japanese stocks showed some bullishness in trading with the Nikkei and the NIFTY50 up by 1.65% and 0.17% respectively. The ASX200, HSI, and SHANGHAI were all down by 0.62%, 2.22%, and 0.43%. 

The federal reserve decision marks a slightly different stance compared to the Bank of Japan and the European Central Bank. 

At the time of writing, all of the metal commodities were down by the following amounts. 

• Gold: -1.23%
• Silver: -2.41%
• Copper: -0.88%
• Platinum: -2.44%
• Palladium: -2.06%

Oil continues to hover down below the $80 mark, not showing any rebound since the announcement of the interim peace deal between the U.S. and Iran. In the author’s view, depressed oil prices are a positive signal for lower inflation over the coming months. 

Summary

As oil continues to stay depressed and in the author’s view, traders are likely to continue monitoring the market for how it responds to Federal rate decisions under the leadership of Kevin Warsh. Jerome Powell presided over 88 total policy FOMC decisions. 

Under his tenure, the FOMC held rates steady 63 times, hiked rates 15 times, and cut rates 10 times, implying slightly hawkish but highly neutral stance. Kevin Warsch acknowledges that inflation levels have been above the target rate of 2%, but it remains too early to gauge his future stance on rate policy and inflation. 

Disclaimer: This article reflects the views and analysis of the author at the time of publication and is based on information believed to be reliable from publicly available sources. Spectra Global makes no representation or warranty, express or implied, as to the accuracy, completeness, or timeliness of the information contained herein, and accepts no liability for any loss arising from reliance on it. Spectra Global is licensed by the UAE Securities and Commodities Authority (SCA) under Category 5 (Promotion). Nothing in this article should be construed as a personal recommendation or as an inducement to enter into any transaction. Past performance is not indicative of future results. Spectra Global has no commercial relationship with any company referenced in this article.