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arkadiusz-sieron

Fischer's Resignation and Gold

September 13, 2017, 9:46 AM Arkadiusz Sieroń

Last week, Stanley Fischer announced that he would resign from his position as the U.S. Federal Reserve Vice Chair in mid-October. What does it mean for the Fed and the gold market?

It was a hot week, so some investors may have missed information about the resignation of the Fed Vice Chair Stanley Fischer. On Wednesday, the veteran central banker said that he would step down for personal reasons from his position effective on or around October 13, 2017, eight months before his term as vice chair expires in June.

What does it mean for the gold market? First, Fischer’s departure could accelerate Trump’s opportunity to reshape the Fed, as his resignation will leave the seven-person board of governors with merely three sitting members (actually four, as Trump nominated Randal Quarles to the board in July, and the Senate approved this nomination last week). Hence, President could significantly influence the future Fed’s course by filling vacancies in the Board.

Second, Fischer was considered a centrist and a reliable ally of Janet Yellen, but perhaps with a slightly hawkish bias. Therefore, his resignation should not significantly shift the balance of votes on interest-rate decisions, but it could slightly decrease the probability of a Fed hike in December at the margin. The current market odds of such a move are about 40 percent.

The key takeaway is that Stanley Fischer, number two at the Fed, announced his resignation mid-October due to personal issues. His stepping down follows Tarullo’s resignation and has prompted some analysts to speculate that “rats are abandoning the sinking ship”. We wouldn’t go as far, but one thing is certain: Fischer’s resignation creates further room for Trump to reshape the Fed’s policymaking staff. However, since Fischer was generally perceived as a centrist, his absence should not importantly move the gold market. A lot depends on the future composition of the FOMC. Stay tuned!

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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

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Oct Market Overview

Gold Market Overview

In the last edition of the Market Overview, we focused on the economic rebound in the Eurozone and geopolitical threats from North Korea. In this issue of our report, we stay in Asia, as we will analyze the link between the Chinese currency and gold. We will also examine China’s role in the gold market, as well as the recent developments in the China’s economy. Last but not least, we will, as usual, provide investors with an update on recent fundamental drivers of the gold market, answering the question of how the medium-term outlook for the gold market has changed over the last quarter and what investors should expect in the last three months of the year.

Read more in the latest Market Overview report.

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