Gold Market Shaken by Fed Signals and Middle East Peace Shifts

**Tim Elliott** (0:00)
This is the Morning Drive, time to talk gold now. Jeff Rhodes is the Managing Director of Business Development for the Middle East and Asia Monetary Metals. However, not in the studio, he's... I'm thinking, Jeff, at the moment you're in London, you were in Singapore. Am I geographically close?

**Jeff Rhodes** (0:18)
Oh, you are exactly spot on, Tim. Yeah, although I'm not in London, I'm in Broxbourne in Hertfordshire, so... Yeah, it's lovely here.

**Tim Elliott** (0:29)
Very nice.

**Jeff Rhodes** (0:29)
That's good.

**Tim Elliott** (0:30)
Well, it's nice to see you. You're looking very well, I have to say. Rested. You've obviously had some sleep, which is good.

**Jeff Rhodes** (0:38)
No, no, far from it.

**Tim Elliott** (0:39)
Oh, really?

**Jeff Rhodes** (0:40)
Far from it, Tim. Yeah, travel was tough, but anyway, it's good.
It's good to be here and good to be chatting.

**Tim Elliott** (0:49)
Well, it's good to see you. So, I've been... I missed your reports this week. I have to say, I know you've been busy, but two major themes for gold this week. Unsurprisingly, I suppose, it's been a week driven by Middle East peace developments. We'll get into that a little bit.
But also hawkish, US Fed signals as well, Jeff. Is that a reasonable kind of a summing up of the situation?

**Jeff Rhodes** (1:15)
Yes, Tim, I think you should be doing this interview in reverse. It's exactly spot on.

**Tim Elliott** (1:20)
I'm sending you some money.

**Jeff Rhodes** (1:25)
Tim, I think it's really great news, what's happening in the region, in our region. And yeah, I think that that was particularly friendly to gold. We know that the rising oil prices, rising inflation has been making people nervous about interest rates and so on.
But the news is really positive. But what was a bit of a shock was the extent of the hawkishness at the FOMC, the Federal Open Market Committee meeting on, started on Tuesday and was announced on Wednesday night. Interest rates unchanged at 3.75%.
However, the big news was the extent of I think 18 or 19 members of the FED, FED Open Market Committee, and nine voted for an increase this year, and another six voted for two increases in rates this year. And it's changed the market perception on the possibility or probability of interest rate hikes. I think by December, it's about 90 percent expect a rate hike. And of course, the rallying gold in January, February was very much based on lower rates, not higher rates. And so unsurprisingly, it's had a bearish impact on the gold price. So before the Fed announcement and press conference, we were around about 4,000, just under 4,400 actually, 4,385, I think the high was. And then we got the news, and currently gold is 4,125.

**Tim Elliott** (3:44)
We have a new Fed Chairman, Kevin Walsh as well, of course, and he is very much, we've confirmed his determination to bring inflation down to the 2% target. And he's released a statement to that effect, Jeff.
Let's move forward to early next year. Where are we then with the gold price?

**Jeff Rhodes** (4:10)
Well, it depends. It depends.
If there is success in bringing the interest rate, the inflation down, then that means lower interest rates. And the popular, the common understanding is inflation equals higher gold prices. But that isn't the case at the moment. Inflation means higher interest rates and lower gold prices. And so I think, assuming that that kind of connection stays in place, if we had 2% inflation means much lower interest rates, good for gold.
It's quite difficult to get this about mentally, but lower interest rates means higher gold prices, in my view. So, if we do have that success in bringing inflation down, I think that gold will actually go up. And it looks as though, I mean, oil price is already coming down sharply, and that has a big impact on the inflation bucket.

**Tim Elliott** (5:29)
Is $4,000 a troy ounce, like a psychological ceiling at the moment? Is there anything in there? I've been reading FX Street this week. For some reason, I'm not even sure. I seem to have an addiction starting, but that's very often mentioned, that $4,000 level, or is in the last few days.

**Jeff Rhodes** (5:55)
Tim, sorry, mate.
I didn't get any of that, because there's obviously a problem with the internet. Could you say it again?

**Tim Elliott** (6:06)
Yeah, don't worry. I'll come back to that. I'm just asking, is $4,000 a psychological ceiling? I was just saying, I've been reading some analysis over the course of this week, and it's been mentioned on a number of occasions. I'm wondering what you feel about that.