By Adam Hamilton – Re-Blogged From Gold Eagle
The dovish Federal Reserve lit a fire under gold and its miners’ stocks this week. As universally expected the FOMC hiked rates for the 9th time in this cycle. But it also lowered its 2019 rate-hike outlook bowing to the stock-market selloff. Traders dumped gold initially thinking that wasn’t dovish enough. But market reactions to the FOMC form over a couple days, and gold surged overnight. Its post-Fed rally has great potential.
Gold-futures speculators dominate gold’s short-term trading action. They punch way above their weight in capital terms thanks to the extreme leverage inherent in gold futures. This week, the minimum margin for trading each 100-ounce contract controlling $125,000 worth of gold at $1250 was just $3400! These traders can run crazy maximum leverage as high as 36.8x, compared to the stock markets’ legal limit of 2x.