October 25, 2016

FOMC Fischer put many interest rate options back on the table. Janet Yellen downplayed the possibility of a rate increase as early as September but affirmed that the economy was doing well and a rate increase was warranted. Within hours of her speech Mr. Fisher telegraphed the Fed’s approaches.

The Fed chair indicated that the FOMC is moving nearer to raising interest rates again, as well as other members said on Friday in comments that left the door open for a hike as early as next month. Also on Friday FOMC member Fed Governor Jerome Powell told Bloomberg Television that they could afford to be patient and that he wanted to see inflation rise before lifting rates.

When we see progress toward 2 percent inflation and a tightening in the labor market and growth strong enough to support all that, we should take the opportunity,” Powell said.

Yellen said that the case for a rate increase had grown stronger, while Fed Vice Chair Stanley Fischer suggested a move could come at the central bank’s September policy meeting if the economy was doing well.

Data from the US on Friday showed the economy growing only sluggishly in the second quarter, Yellen said a lot of new jobs were being created and economic growth would likely continue at a moderate pace.

The Fed has policy meetings scheduled in September November, and December. It a year ago from the December meeting that the Fed raised their rates for the first time in many years.

With the US election in full tilt the Fed might just put everything off until after the election cycle leaving December once again the month for the rate increase.


Gold is trading at 1321.15 down $4.25 for the session. It is likely that gold prices will be boosted by the Federal Reserve’s reluctance to increase lending rates in order not to jeopardize a fragile US economic recovery, though money market futures predict one rate hike by December.

Yellen’s speech confirmed this view. This could mean that downside risk in gold on a Fed rate hike is limited to $1,270 an ounce. As long as the US central bank does not aggressively raise interest rates, there is no reason why the gold bull market cannot continue, though I expect the easy money in this asset class has now been made for 2016.

The market attention will be on Friday’s U.S. non-farm payroll numbers, and should the reading again be strong, a further selloff of gold can be expected, Lum said.


OPEC and outside producers such as Russia will agree steps next month to support prices such as a production freeze.

The market is increasingly likely to discount the outcome of the event, given, even in the instance of a freeze being agreed, compliance will be an issue,” Barclays said in a report.

Members of the Organization of the Petroleum Exporting Countries are due to meet informally in Algeria on Sept. 26-28 on the sidelines of the International Energy Forum. Russia is also expected to attend the IEF.


Copper market is set stay in surplus despite some curtailment by top producers Freeport McMoRan and Glencore as new mines and expansions, particularly in Peru, ramp up to capacity.

While top producer Chile settled into a gentle decline, Peruvian copper production surged by more than 50% to just under 741,000 tonnes in the first half of the year.
Increasing arrivals at LME warehouses in Singapore and South Korea have broadly corresponded to export flows out of China.



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