So, farewell Janet Yellen.
How much of the credit for fixing the US economy will ultimately go to you, and how much will actually be hoovered up by the Trump publicity machine?
A question that of course depends on the given consumer’s taste in news outlets, but true to form Yellen chaired her last Federal Open Markets Committee without grandstanding in any way, and without even allowing the committee to say much that was meaningful that hadn’t already been said after the previous month.
The minutes showed that the committee had agreed that “the near-term risks to the economic outlook appear roughly balanced.” There was a slight tweaking of the language on inflation, and that was pretty much it.
So will there be a rate rise in March?
The new man in the chair, Jerome Powell, has plenty of room for manoeuvre. The Fed minutes themselves have been equivocal on the timing of any rate rises, while the general strength of the US economy has mitigated calls for interventions for purely palliative reasons.
There is the weakness of the dollar to consider of course, the dollar having tumbled in recent months against every major currency, even including sterling, which has Brexit-related troubles of its own.
But on the whole, the Fed’s statement that economic conditions are likely to “warrant further gradual increases in the federal funds rate”, looks uncontroversial.
So the market is expecting three rate rises of 25 basis points during 2018. The Fed will be looking to keep abreast of inflation, not helped by that weak dollar, and to guard against other potential shocks, such as another government shutdown or some adverse development on the international scene.
It won’t want to go too fast, for fear of putting the brakes on growth. But it won’t want to go too slow either, for fear that things get out of hand. An early bust in the US economy wouldn’t do Mr Trump’s prospects of re-election much good, and would put a dampener on Mr Powell’s own tenure too.
But what does it all mean for metals prices? Firstly, all this economic activity is good for demand. Even setting aside the new paradigms being created by electric vehicles, global growth on the scale we are currently enjoying is good for base metals prices across the board.
The gold price continues to move in inverse relation to the dollar and in spite of the fad for bitcoin remains the haven asset of choice. If the Fed does follow through on its stated aim of putting up rates this year, there will be sustained upward pressure on the dollar price, and corresponding downward pressure on gold.
But interestingly, just lately the dollar has been moving, at least in part, more on the strength of macroeconomic sentiment than on internal US economic metrics. So, investors nervous about the potential damage of a shutdown for the first time in a long while have a viable fiat currency alternative to move into: the euro.
Buying the euro was a lot riskier a few years ago, when the series of economic crises that shook the world from 2007 onwards put significant outward pressure on the Eurozone’s political fissures.
Slowdowns in all of Europe’s major economies bar Germany didn’t help, and while some buyers went to gold, the only real currency of choice was the one the world has traded by for more than 80 years now, the US dollar.
A strong European economy with political upheaval in the rear-view mirror presents a different picture to the world’s currency traders. No need to rely too heavily on the dollar. Because, after all, with the global economy in full swing, there are also gains to be hand in equities and other instruments more directly leveraged to output.
The FTSE 100 has been under pressure this year, but only under pressure to sustain its record highs. Right now investors don’t need the dollar like they did six years ago, and certainly not like they did sixty years ago.
That presents a good outlook for metals prices in general, and a moderately dovish figure moving into the Fed chair is likely to help things along.
Sure, Donald Trump has publicly stated that he wants a strong dollar. But he’s also stated that he wants to make America “great” again. As if its greatness had ever gone away.