Today’s Spotlight Market
The Federal Reserve kept rates unchanged at its June meeting, paving the way for higher Gold prices in the near-term. The yellow metal has closed higher for six consecutive sessions and is up strongly this morning. The median of FOMC members still expects two more rate hikes by year?s end. However, the number of FOMC participants expecting only one more rate increase in 2016 has gone from one in March to six in June. In addition to the FOMC rate decision and policy statement, Gold prices have recently gotten support from the looming Brexit vote. Traders have been nervous about the vote, and there has been defensive buying of precious metals as a defensive play.
Fundamentals
Traders have become doubtful that the Fed will raise rates more than once more before the end of 2016, citing weaker economic data. Data has not been abysmal, but has also done little to instill confidence. US industrial production fell 0.4% in May after a decent April. This marks the seventh decline in the indicator over the past nine months. Consumers have become more skeptical over the condition of the economy, as the Michigan Consumer Sentiment Index fell to 94.3, down from 94.7. The current conditions gauge rose to 111.7 from 109.9, but the expectations component fell to 83.2 from 84.9, which is 5.2% lower than the same period last year. This could hold the Fed back from raising interest rates as aggressively as many members would like, which may negatively impact the US Dollar. This also bolsters Gold?s appeal as a defensive instrument. The upcoming Brexit vote could have a large impact on near-term Gold prices, especially if UK voters favor leaving the EU. Some analysts have speculated that the price of Gold could test the $1,400 level with a ?leave? vote. Regardless of the outcome, the mere presence of the vote will increase volatility in the near-term.
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