Gold Pulls Back From Seven Week High on Fed Comments

But the Fed is still controlling markets with rhetoric.

Bullion.Directory precious metals analysis 7 April, 2015
By Christopher Lemieux
Senior Analyst at Bullion.Directory; Senior FX and Commodities Analyst at FX Analytics

Gold pulls back after comments from a few Federal Reserve officials following a horrendous non-farm payrolls report on Friday. With expectations of 246,000 jobs added in March, many forecasts were expecting a slightly weaker print of roughly 225,000. However, only 126,000 jobs were added; and, once again, weather was the scapegoat. 

Gold bounced over $20 per toz. on the news, however Federal Reserve of Atlanta President Dennis Lockhart suggested that the weak economic data wouldn’t persist – even thought the data has been anything but strong.

Lockhart followed up his optimism with hopes that the first rate hike is expected between July and September, although euro-dollar traders are suggesting it will be more towards the end of the year, if any.

In a recent article by Bloomberg, The Atlanta regional president said he was not ready to believe economic weakness is setting in and the poor non-farm payroll number was one month.

True, but the Federal Reserve must believe a slowdown is not underway after a $4.4 trillion balance sheet expansion and the Fed funds rate stuck in the lower bound. If the US economy was on the precipitous of a recession, following the weakest economic recovery in history, the Fed has no way fending off economic weakness.

The Fed is walking a very thin line between talking up a stronger dollar with interest rate jibber-jaber and talking down the equity bubble on the presumption that the economy is weakening. The dollar has already retraced the drop following Friday’s job report.

The Fed is trapped and confused. William Dudley, President of the New York Fed Bank, sounded a little worried, voicing his concerns over the a stronger dollar and weak oil prices.

Remember when low oil prices were unanimously great for the “strengthening consumer”?

Meanwhile, gold found resistance in the supply zone $1,222/24 and has come down on the stronger dollar and risk appetite.

Price action will find support at former resistance of $1,209, which is corresponding with dynamic support provided by the 20-four hour EMA.

If gold can over take $1,224 then momentum could send prices higher to $1,234 per toz.

The Federal Reserve may believe they have everything under control, but if history serves as a lesson, they most certainly do not.

As each week passes, the case for stronger gold prices strengthen.

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