Current Thoughts for 12/15/2015

The precious metals are trading in uninspiring ranges so far today and this should not come as much of a surprise.  Market participants are trimming positions ahead of the much anticipated FOMC tomorrow, where it is widely expected that the Fed will raise interest rates for the first time in nearly ten years.  Given that gold has been in a steep decline since October and is hovering around six year lows, it appears that the market has already priced in a rate hike.  For that reason, the Fed raising interest rates should not catch the market off guard, and may limit the downside for gold.  What would take the market by surprise is if the Fed does not raise the rate or if the tone of the commentary from the meeting is overly dovish.  In this scenario, the already highly short-positioned gold market would be forced to cover positions which could lead to a sharp jump higher for the yellow metal.  The risk of an exaggerated reactionary move to the Fed seems to be weighted higher rather than lower… we will of course see tomorrow though!  The FOMC decision will come out at 11 AM PST tomorrow… stay tuned!

Gold was pretty much a non-event today and the miners moved up and down all day. Everyone waiting for the Fed tomorrow.

With tomorrow’s report I took some snapshots of what Steve Liesman over at CNBC is predicting for the markets. Do you see what the effect of a rate hike has on pretty much everything? So why does CNBC want it so badly? And the picture below that has 38% thinking that rate hikes coming would be bad for the economy.

Tomorrow I think we get a one and done for the Fed. It definitely is a credibility issue they have if they don’t raise and it’s also the wrong policy to raise as we are not ready from the data I read for a rise in rates yet.

I also think we get a quick spike down in gold as the dollar strengthens and then a bounce in gold. $1,050 is the huge resistance level for gold and the area I am watching to break. If we get below that and stay below that by close tomorrow then under $1,000 is next up on the table. I do however think a lot of the downside attributed to the coming higher rates has been priced into gold.