Business

Gold is suffering the worst 6-week tumble since May 2013 and the last 24 hours have seen the losses accelerate as following The Fed's second rate hike in a decade, someone dumped over $10 billion notional of the precious metal through the futures market. As the dollar surges to 14 year highs (and EUR tumbles) so silver also is plunging most since the election near a $15 handle once again.

over 90,000 contracts were puked through futures in the brief time after yesterday's rate hike decision - over $10 billion notional, and that selling pressure has re-accelerated this morning

The FOMC rate hike has come and gone, and, contrary to expectations, it was far more hawkish than many expected, not so much due to the actual 25bps tightening, or the one additional rate hike as forecast by the "dots", bringing the total for 2017 to three, but due to Yellen's hint that the economy no longer needs a fiscal stimulus, and as a result any excessive fiscal stimulus by Trump would lead to even more rate hikes.

What is Janet Yellen thinking?

As the Fed wound down its QE program in 2014, the $USD hit liftoff. It has since hovered in the mid- to upper-‘90s.

Throughout this period, anytime the $USD began to move sharply higher one of more Fed officials appeared to “talk down” the $USD.

The reasoning here is simply. A strong $USD crushes corporate profits. Indeed, since the $USD began its bull market S&P 500 earnings have collapsed to 2012 levels.

Fed Increases Rates 0.25% - Rising Interest Rates Positive For Gold

The Federal Reserve increased interest rates by 0.25% as expected yesterday leading to gold falling to lows last seen in February 2016 and the dollar rising to its highest level against the euro in 14 years.

Throughout the campaigning cycle, Trump sent a very clear message to businesses looking to move manufacturing operations offshore by repeatedly saying that subsequent imports would be hit with a massive 35% tariff.  Here is a December 4th tweet storm from the President-elect on the topic:

The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country,

— Donald J. Trump (@realDonaldTrump) December 4, 2016