Some important market indicators were initially showing that investors mostly doubted that an interest rate hike will come before July. Stocks, oil and also gold opened the day with gains in the NYSE, showing investor sentiment that money supplies will not be tightened yet. Even if the Fed does decide to go ahead with an interest rate hike before July, the hike should not be significant enough to rattle economic fundamentals that underpin trade in the NYSE, US government treasuries or commodities such as oil. However, the information on the minutes, and the Fed’s willingness to hike rates come June, dented investor confidence and mayor indicators closed down, as did oil and gold prices.
The price of gold could be negatively influenced if the Fed manages to hike interest rates twice or more this year. As a non interest bearing store of value, gold’s position in the market will weaken relative to the interest bearing US Dollar and US government treasuries if interests rise more than expected. However, with the mixed economic data coming out of the US and elsewhere around the world, a situation in which the interest rates are above 1% by the year’s end, are highly unlikely. Additionally worrying economic data from other mayor world players should buoy the price of gold and shield it somewhat from rate hikes on the greenback.
In the meantime, there will still be more uncertainty and a lot of room for additional speculation until the Fed makes its move come June. This has the potential of adding risks to planned investment moves heading into the weekend.
