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RSM Chief Economist Joseph Brusueras: Warsh delivered the right hawkish signals at the press conference and attempted to reinforce the Fed’s credibility in restoring price stability, while also enhancing his own credibility.U.S. stocks continued to decline after the Walsh press conference, with the S&P 500 falling 1%, its biggest drop since July 29, the Dow Jones Industrial Average down 1.65%, and the Nasdaq Composite down 0.6%.On September 17th, Federal Reserve Chairman Warsh declined to answer questions at a press conference regarding his interactions with US President Trump. Trump has been calling for lower interest rates in recent months. Warsh stated, "I have no comment on my discussions with the president." White House Council of Economic Advisers Chairman Christopher Phelan said on Tuesday that raising interest rates would be a "mistake."On September 17th, Federal Reserve Chairman Warsh stated that he would not disclose details of future interest rate decisions by the Federal Open Market Committee (FOMC). He said, "I am not responsible for providing forward guidance. Our decision today (to raise interest rates) is a carefully considered, serious, and responsible one. We have been preparing for and thinking about this decision for the past 110 or 120 days." Warsh also stated that this decision was not market-driven. He said, "Our decision today is based on our assessment of the current situation, our judgment of the employment trend, and our assessment of the strength of the economy. Sometimes, the market tries to anticipate our decisions. I watch market prices to see what information the market is sending. But todays decision is our own."On September 17th, Warsh stated that while the Federal Reserve cannot prevent price shocks in commodities such as oil on its own, the central bank can use policy tools to prevent further spread of inflationary pressures. Warsh said, "We cannot influence the price of any single commodity, such as oil or groceries." However, he pointed out, "We can and will ensure that any changes in relative prices do not spread further, and do not have second- or third-order effects on the economy. Thats our responsibility, and thats what were doing." Warsh made these remarks as U.S. diesel prices hit a record high due to the Iran war.

Gold Reaches a 5-Week High as U.S. Inflation Eases

Skylar Williams

Aug 11, 2022 11:16


The U.S. inflation rate is dropping, as predicted. The next question is where will gold go.


The Dollar Index, which measures the dollar to six major currencies led by the euro, reached a monthly low of 104.51 on Wednesday.


The gold futures contract for December on the New York Comex finished at $1,813.70, a $1.40 rise. Earlier, it hit $1,824.60, after rising 1% during the previous two sessions.


At 2:50 p.m. ET (18:50 GMT), the spot price of bullion, which some traders watch more closely than futures, was $1,790.58, down $3.91, or 0.2%. The peak of the day was $1,807,95.


The dollar declined on the Labor Department's announcement that the Consumer Price Index rose 8.5% year-over-year in July, compared to the highest annual increase in 41 years (9.1% in June).


Media surveys of experts in the United States predicted an annual CPI increase of 8.7% for last month. In July, the indicator showed no growth, compared to a 1.3% increase in June.


Money market traders immediately priced in the possibility of a 50-basis-point, or half-percentage-point, hike at the Federal Reserve's next rate review meeting on September 21. Prior to this, a 75-basis-point, or three-quarter percentage point, increase was strongly anticipated.


Ed Moya, an analyst at the online trading platform OANDA, remarked, "This was a favorable inflation data, since every indicator came in below the consensus forecast." Traders began setting their portfolios for a September Fed reversal when the CPI data came in cooler than expected.


Moya stated, "it is not a certain conclusion that the Fed will be much less aggressive with interest rate rises." However, stock traders may remain fairly aggressive in this situation. "Gold's path to the upside still exists, but it might take much longer if stocks remain optimistic for an extended period of time."


In the past, gold bulls would run for shelter at the slightest mention of a rate rise. Gold has been able to survive such anxieties in recent weeks, even after last week's amazing U.S. non-farm payrolls data for July, which showed more than double the pace of job growth projected by experts. Typically, a report of this significance would urge the Fed to be more proactive with rate hikes.


Thursday will also see the publication of the July producer price index and weekly data on new jobless claims, while Friday will see the release of the University of Michigan consumer sentiment index.


Bullion advocates would assert that inflation protection is an inherent part of the daily flows into futures, exchange-traded funds, and other investment vehicles used to access the metal. Those who assert differently are uneducated, they would add. Gold has never fully escaped its link with inflation.


Gold's performance over the previous two years has not been commensurate with its status as the ultimate safe haven.


Since gold reached record highs above $2,100 in August 2020, investors have been more frequently disappointed than elated. The dollar dropped below $1,600 on July 14 for the first time since August 2021 after the June CPI report indicated annual inflation at a new four-decade high of 9.1%.

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