Economists are keeping a close eye on two things that could pose a threat to our nation’s economic recovery: increasing inflation and new COVID variants. On Tuesday, Fed officials will meet for their two-day policy meeting. After which, experts believe the Fed will maintain that a strong U.S. recovery and its planning for an eventual policy shift are ongoing. However, these growing concerns have helped precious metal prices. Early Monday morning spot and U.S. gold futures rose by 0.4%.
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As rising prices and the spread of new Covid-19 variants increase risks to the US economy, Federal Reserve officials are expected to maintain their easy money policies intended to help American companies and workers survive the pandemic damage.
But as the policy-setting Federal Open Market Committee (FOMC) begins its two-day policy meeting Tuesday, markets and traders will be watching for hints of when it will begin tapering its massive monthly debt purchases.
The bond-buying program aimed to ease lending conditions during the crisis, but has come under scrutiny recently as inflation has soared to record levels as businesses reopen and consumers spend the savings built up during the worst months of the pandemic.
And focus also will be on any sign the Fed is rethinking its pledge to keep the benchmark lending rate at zero until the economy achieves maximum employment.
Fed Chair Jerome Powell has repeatedly said the rise in inflation is a temporary effect of the economy getting back to normal, and that the Fed has tools to respond if the surge goes on too long.
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Reuters via CNBC
Gold eases as market prepares for Fed meeting outcome
Gold edged lower on Monday as investors turned cautious in the run-up to a Federal Reserve policy meeting, overshadowing some support from a weaker dollar.
Spot gold was down 0.2% at $1,798.41 per ounce by 1:56 p.m. ET, while U.S. gold futures settled 0.1% lower at $1,799.20.
The U.S. central bank will begin its two-day policy meeting on Tuesday.
“The concern now is that we will get the first hints of not necessarily a rate increase but what kind of reductions the Fed envisions to its balance sheet, and that could be a trigger for rates to move higher,” said Edward Meir, analyst with ED&F Man Capital Markets.
Meir, however, said that was unlikely to drive a sustained fall in gold, with the metal drawing support from a dovish European Central Bank, a currently accommodative Fed, large fiscal stimulus and higher inflation.
Both the ECB and Fed have suggested they will keep monetary policy accommodative for some time.
Yet Han Tan, market analyst at Exinity Group, said that if the policy-setting Federal Open Market Committee provides more details about tapering plans, gold could test the June lows of $1,750-$1,770.
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Biden ‘owes’ it to America to put pressure on China, foreign policy expert says
A meeting between U.S. and Chinese officials turned confrontational when China blamed the U.S. for a “stalemate” in the relationship. In an interview on FOX Business’ “Mornings with Maria,” Harry Kazianis, senior director at the Center for National Interest, argued that the Chinese Communist Party is “at war” with the United States and that the U.S. should pressure China with punitive action until the country agrees to an investigation into the origins of COVID-19.
You can watch the full interview, here.