The Fed left its monetary policy unchanged. However, the lack of any action amid economic recovery is dovish – good news for gold. On Wednesday (Apr. 28), the FOMC has published its newest statement on monetary policy . The statement wasn’t significantly altered. The main change is that the Fed has noticed the progress on vaccinations and strong policy support, and that, in consequence, the economic outlook has improved. Previously, the US central bank said that indicators of economic activity and employment “have turned up recently, although the sectors most adversely affected by the pandemic remain weak”, while now these indicators “have strengthened”, while “the sectors most adversely affected by the pandemic remain weak but have shown improvement”. So, the Fed acknowledged the fact that the economy has significantly recovered .
Even the smallest moves can be of utmost importance to a number of investors. This time, the USDX was the one to give a subtle nod to the upcoming changes. In yesterday’s analysis , I wrote about the subtle, yet very important short-term detail that likely indicated a major turnaround in the USD Index. This is huge news for the precious metals investors, as a major turnaround in the USDX (and the subsequent rallies) would be very likely to translate into a severe price slide. The important change was that the situation regarded the USD’s 61.8% Fibonacci retracement.
I wouldn’t be surprised to see this week end without any major reversal, but we could see one on Monday. Some traders won’t be able to adjust their stop-loss levels at that time, so if anyone “big” wants to squeeze the profits out of individual traders shorting the USDX before the latter rallies, it would be a perfect time. The idea could be to trigger a small sell-off early on Monday, whi
Indicators are pointing to gold and mining ETFs running out of breath. They don’t seem to have what it takes to the move to the finish line. Despite gold, silver and mining stocks’ recent corrective upswings, the precious metals are running out of steam. After bursting off of the lows – while failing to recognize that it’s a marathon and not a sprint – the precious metals’ late-week breather signals that their stamina isn’t what it used to be. Moreover, with false breakouts and sanguine sentiment causing an adrenaline rush that’s likely to fade, the precious metals’ transformation from stalwart to sloth could leave investors feeling increasingly dejected.
The tax hike proposal shock is over, and S&P 500 took again on the ATHs on Friday. Buying pressure throughout the day lasted almost till the closing bell, and is likely to continue this week as well. And why shouldn‘t it – has anything changed? The artificial selling any capital gains tax hike would generate, is likely to come before year end – not now:
(…) Look still though how little has changed, as if the tax raising plans haven‘t been around since the infrastructure bill or implicitly even before. It‘s still April, and markets are pricing in not only this select reality, but broader tax increases coming. Yes, they have woken up, and the reflation paradigm is getting an unwelcome companion. This hit won‘t bring down the bull, but will slow it down – and the implications for broader economy will only hasten the pronounced advent of the commodities supercycle (well underway since the corona deflationary crash last year).
A day like almost any other – S&P 500 about to take again on the ATHs until the capital gains tax hike proposal came, shaving off 50 points in stocks within an hour. The 4,415 support held though, both before and after the closing bell. Are we ready to shake off the cold water and resume running higher again? Depends on where you look – stocks have quite some recovering still to do, and it‘s the precious metals and commodities that are performing best today. Both as an index and sectoral collection, the S&P 500 sustained broad damage, concentrated in the tech heavyweights. The volatility spike has been partially repelled but option traders seem expecting another shoe to drop, which attests to us better dampening expectations of a fast return above 4,170.