By Adam Hamilton – Re-Blogged Fron http://www.Gold-Eagle.com
Gold was again blasted to new post-election lows this week, further trashing contrarian sentiment. The Fed proved more hawkish than expected in its rate-hike-trajectory forecast, unleashing heavy selling in gold futures. This catapulted gold bearishness back up to extremes not seen in a year. Investors are once again convinced gold is doomed, and thus radically underinvested. That’s actually super-bullish for gold.
It certainly wasn’t the Fed’s second rate hike in 10.5 years this week that hammered gold. Actually that was universally expected. Federal-funds-futures traders had assigned it an average 96% probability in the two weeks leading up to that rate hike. If the Fed had simply raised its federal-funds rate by 25 basis points to a 0.50%-to-0.75% range, gold-futures speculators would’ve likely yawned. They knew it was coming.
The unexpected hawkishness came in the FOMC’s Summary of Economic Projections that is published quarterly at every other policy meeting. Also called the “dot plot”, it shows where each FOMC member and regional Fed president expects the FFR to be in the next several years and beyond. The collective expectations of these top officials who actually set monetary policy grew from two rate hikes in 2017 to three.