Gold falls as Fed hawks grow bolder
By Colin Twiggs
October 30th, 2015 4:00 p.m. EDT (7:00 a.m. AEDT)
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A quick summary of the Fed's latest FOMC statement released Wednesday:
- Household spending and business fixed investment increasing at solid rates
- Housing sector improved further
- Net exports remain soft
- Underutilization of labor resources has diminished since early this year
- Inflation remains below 2%, reflecting low energy prices
- Risks are balanced
- Inflation expected to rise gradually toward 2 percent over the medium term.
The hawks grow bolder as hourly manufacturing earnings rise — fueled by solid domestic performance — with net exports the only remaining concern.
Interest Rates and the Dollar
Long-term interest rates found support at 2.0% — the Fed's target inflation rate — with 10-year Treasury yields rallying to test resistance at 2.25 percent. Recovery of 13-week Twiggs Momentum above zero would signal an up-trend.
The Dollar Index is testing resistance at 98. Expectation of higher rates will fuel support for the Dollar. Respect of zero would indicate long-term buying pressure. Breakout above 98 would signal another advance.
Gold broke medium-term support at $1150/ounce after the latest FOMC statement. Higher interest rates and a stronger Dollar would both weaken demand for gold. Breach warns of a test of the primary level at $1100. A 13-week Twiggs Momentum peak below zero suggests continuation of the primary down-trend.
* Target calculation: 1200 - ( 1400 - 1200 ) = 1000
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