Bullion Investors Versus the Machines
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Precious metals prices fell sharply on renewed concerns the Federal Reserve will be raising interest rates sometime this fall. Friday’s jobs report painted a picture of healthy growth, fostering a new round of speculation that Janet Yellen and the FOMC will withdraw stimulus.
Investors have seen this a thousand times before. The reaction in gold and silver markets was almost as predictable as the sunrise. When markets continually respond to highly managed data from the Bureau of Labor Statistics – or some other bureaucracy – in a machine-like way, you have to assume it’s because most of the trading is actually done by high frequency trading machines (HFTs).
The algorithms calculated the Fed probably would not hike any time soon when employment missed expectations by a mile in early June. Precious metals rallied.
Gold and silver prices stumbled the following month when the same report showed much better than expected data. It was rally time again in late July when the GDP data turned out to be a big disappointment. Now there is “good news” on jobs and the machines responded by selling.
It’s been going on for years. Actual humans grow tired of the constant whipsaw around Fed policy expectations and some ask more fundamental questions. For instance, do we have free markets when what matters most is government data and how the central planners at the Federal Reserve might respond to it?
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