This coming week we have another FOMC meeting. All the stock pundits are watching to see what Yellen says about when an interest rate hike will come. Will this word or that word be used like "patient", etc.
Meanwhile, the dollar continues to rise in part because of an expectation that rates are going up, at least per the pundits. So if Yellen were to keep language that makes the pundits believe there will NOT be an imminent rate hike (such as keeping the word "patient" in her statement), it could in theory cause a temporary drop in the dollar. This would also give the stock market another upward push. This would probably be short term good for PM's if the dollar was dropping off the news.
However if Yellen says something that does make it sound like an imminent rate hike is coming (3 to 6 months) by removing the word "patient", etc, I think it will make the dollar move up even stronger and would likely cause temporary drops in stock prices. This would probably hurt PM's a bit short term.
Conventional wisdom is she will go out of her way to not rattle the stock markets in the language used, but if it is time to raise rates, I think she will make it clear by what language she uses. Some pundits opine that the Fed doesn't want to let the dollar get "too strong", so they might hold off longer on when they do raise rates for fear that if rates get raised that will further strengthen the dollar. This would have an added benefit of helping stocks which everyone except the shorters seems to like.
What some might forget here in the US is that while a stronger US dollar does generally keep PM prices down in US dollar terms, all over the world where the currencies are going down in value compared to the US dollar, their PM prices are rising big time. People who bought gold in currencies that have lost much value over the past year like Euros, Canadian dollars, etc, are doing well right now since those currencies are down and gold priced in those currencies is up.
Here are charts of gold in Euros, then one in Canadian dollars. Click on the one year chart for a good look over the past year:
http://www.goldpriceoz.com/gold-price-europe/
http://goldprice.org/gold-price-canada.html
Just my opinion.
Jim
