Market participants analyze FOMC minutes and await the start of the Economic Symposium in Jackson Hole Wyoming next week

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Now for the third consecutive day gold prices have closed modestly lower as market participants digest the minutes released yesterday from the last so FOMC meeting and the inferences that can be drawn from an exceedingly strong jobs report last week. As of 4:30 PM, EST gold futures basis’s most active December 2021 contract is currently trading off by two dollars and is fixed at $1782.40. Gold futures opened at $1789.50 and traded to a low of $1774.60 and a high of $1795.

An exceedingly strong U.S. dollar dwarfed gold’s drawdown of 0.11%. The dollar gained almost ½ a percent (0.47%), gaining a total of 0.436 points, and is currently fixed at 93.58. On a closing basis, the dollar index is at its highest trading value this year. The dollar index reached 93.48 at the end of March 2020 and from there traded sharply lower until it found support at 89.525.

In exactly one week, central banks members globally, including Federal Reserve members, will meet at Jackson Hole, Wyoming for the annual Economic Symposium. While it is widely anticipated that market participants will gain more insight into the current thought process of Federal Reserve members including when they will begin to taper their monthly asset purchases of $120 billion of Treasuries and MBS (mortgage-backed securities).

However, currently, the belief is that no concrete announcement will be forthcoming from the symposium as Federal Reserve members await the Labor Department’s jobs report from August 2020 to determine if their criteria of “substantial progress” of new jobs being created. For that reason, many analysts believe that any concrete announcement with timelines for the onset of tapering will occur at the September FOMC meeting.

The minutes from last month’s FOMC meeting conveyed that the majority of Fed officials believed it was time to begin to normalize their exceedingly accommodative monetary policy beginning with allocating less capital monthly to their asset purchases. At the same time, it is not widely believed that we will immediately see any interest rate hikes this year, and most likely remain where they are at least for the first three quarters of 2022.

The current “dot plot” indicates that there will be no interest rate hikes until 2023. However, the Fed has been adamant that the economic data will guide the Federal Reserve’s mandate and determine when it is time to begin to normalize their monetary policy to reflect the post-pandemic economy.

The only large caveat to the recent reports suggesting strong economic growth, such as the decline in U.S. jobless claims, as well as the last month’s report that showed that the leading economic index jumped by 0.9% last month is the unknown in regards to the new Delta variant of Covid-19. The new Delta variant has been ravishing parts of countries worldwide, including the United States. John Hopkins University of medicine reported that as of Friday, August 13, the number of Covid-19 cases had exceeded 205 million individuals, including 4.33 million people who have died from contracting the virus.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer