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Is this the quiet before the storm or the quiet before the quiet? Gold is trading in a narrow and defined trading range. Only eight dollars separates the intraday low and intraday high for today’s trading range. Currently gold futures, basis the most active April contract, is trading -$1.40 lower and fixed at $1,325.70.
With next week’s FOMC meeting, traders across the board are looking at possible outcomes, although the likelihood of an interest rate hike is believed to be almost a certainty. As of 4:00 PM Eastern standard time, the countdown clock on the CME’s FedWatch tool indicates there are roughly 6 days, 19 hours, and two minutes before the next FOMC meeting begins.
According to the FedWatch tool, there is an 88.8% probability that next week’s FOMC meeting will result in a rate hike of approximately 25 basis points taking the fed funds rate from 1.25% – 1.50% to 1.50% – 1.75 %. There is only an 11.2% probability that interest rates will remain the same with no rate hike resulting from the meeting.
Focusing on Declining Equity Prices
Now for the third consecutive day, U.S. equities continue to trade under pressure, resulting in lower pricing across the board in all of the major indexes. The last time the Dow Jones Industrial Average closed higher on the day was Friday of last week. Although traders bid the Dow higher on Monday’s trading then Friday’s closing price, the index closed lower on the day.
The Dow was able to maintain a price above 25,000 on Monday, however selling pressure on Tuesday moved the index to 24,996. Today traders move this index 248 points lower to close at 24,758.
On Monday the only major index to close in positive territory was the tech heavy NASDAQ composite. However, on Tuesday the NASDAQ joined the other major indexes resulting in substantially lower pricing, which has carried over in today’s trading. Today the NASDAQ lost about a quarter percent closing at 7493.
Spot gold is currently trading at $1325 per ounce, which is a net decline of $.90 on the day. On closer inspection dollar strength is providing $.80 of today’s decline, with sellers accounting for the remaining $.10, this according to the Kitco Gold Index.
Obviously, traders are taking a wait-and-see attitude. A further or steeper decline in U.S. equities or an unexpected aggressive move by the Fed would certainly change that.
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Wishing you as always, good trading,