By Barani Krishnan

Investing.com: One of the worst epithets directed at investors professionals is that they’re compared to blindfolded monkeys throwing darts into financial pages in newspapers to pick portfolios nearly as good as those chosen by Wall Street’s top.

It was a little like that Friday market action.

Gold, the S&P 500, dollar and Treasury yields all fell simultaneously after Federal Reserve Chair Jay Powell’s affirmation of a potential stimulus taper by November or December, and his admission of continued uncertainty (for the 999th time, possibly) about the timeline for a rate hike. 

Bullion did rebound before Friday’s close, but the indiscriminate plunge in both risk assets and safe havens earlier in the day bears reflecting.

Extreme market uncertainty/negativity leads to extreme risk aversion. This is a known fact, just as Covid-19 and the 9/11 financial crises would confirm. 

This was not one of these occasions.

Markets were on edge since the beginning of this year, unsure about the timing of the taper. 

The cat was out of its bag for more than a month. 

Powell’s first signaling of a November announcement on the taper came after the Fed’s monthly policy meeting on Sept 22. 

The central bank’s minutes of that meeting, published on Oct 13, even proposed to cut some $15 billion each month from the stimulus till the monthly outlay of $120 billion was done in eight months. 

Powell didn’t just reiterate Friday the Fed is on track for a taper. He was simply lending credibility to something that was already almost certain.

However, a rate rise is something entirely different.

Ignoring the Fed’s inability with accuracy to tell when the next Covid-era rate rise will happen is not surprising.

Recent months have seen a dramatic breakdown of supply chains and an uneven labor market, making the dynamics of recovery even more difficult.

When raising interest rates, central bankers don’t just think about inflation. As we all know, the most vulnerable groups were hit by the pandemic. The Fed considers labor market statistics to be equally important, which includes how other racial groups fare.

Wall Street’s top people often associate smart money with their best. However, there is also dumb money. 

Mind-boggling was the state of investor ignorance on Friday.

First, Powell was not delivering Senate testimony. He wasn’t holding one of his news conferences after every Fed monthly meeting. Powell had just returned from brainstorming with policymakers at the central bank. Friday’s event was a virtual appearance at a Bank of International Settlements conference on Africa. Amazing was the way it was magnified so that it could be compared to a Jackson Hole-style event.

What’s certain is that the Fed cannot be certain about a rate hike until it achieves the matrix it has set on employment and supply-demand of materials. 

We can criticize the Fed’s lax attitude toward price pressures, especially its insistence that the current inflation is transient, and continue speculating on timelines of between June and December 2022 for a rate hike — based on ramblings of other Fed speakers and monthly updates of the so-called dot plot.

But the bottomline is Powell won’t pull the trigger until he’s certain that all or most conditions – including those that might secure his reappointment – are met. 

It isn’t news that the rate rise will be uncertain. Intelligent money needs to be better.

Gold Market & Price Roundup

Long-term gold investors saw another week of gains. However, they were not before experiencing a rollercoaster on Friday, which took them to the $1,800 level, then plunge, and finally a positive end.

U.S. gold futures’ most active contract, , settled at $1,796.30 per ounce on New York’s Comex, up $14.40, or 0.8%. The session began earlier and December gold climbed to $1815.50. This is only the second week in which it has exceeded $1,800. 

For the week, the benchmark gold futures contract settled up 1.6%, extending the previous week’s gain of 0.6%.

Friday’s swings in gold were triggered by Fed Chair Powell, who during a virtual appearance at a Bank of International Settlements event, confirmed the central bank’s plans to start tapering its monthly stimulus of $120 billion between November and December, while holding out on giving a timeline for rate hikes.

For months, markets have been waiting anxiously to hear when the stimulus taper will begin. The speculation is now focusing on rates. 

Gold wasn’t the only market tossed around in Friday’s session: the went from a record high to negative by midday.

The trifecta was made of the gold and the fell on this day, which indicated that the investors had no idea what to do. 

“The key takeaway from Powell was that the Fed is on track to begin tapering and that should be done by mid-2022, transitory inflation might last a little longer than expected, and that rate hike expectations should be written in pencil,” said Ed Moya, analyst at online trading platform OANDA.

Moya said that gold finished the week in the positive, up 1.5%, and was still a testimony to its intrinsic strength, after being trapped in the lower levels of $1,700 for weeks.

“Wall Street knows that negative real yields will remain well into next year and that that gold will reassert itself as an inflation hedge,” he added.

Oil Market & Price Roundup

As oil bulls recorded a ninth consecutive win week, market attention turned again to the U.S. Storage Hub for Crude inventories.

U.S. crude’s benchmark settled up $1.26, or 1.5%, at $83.76 per barrel. WTI fell to as low as $80.81 on Thursday but on Friday it reached a peak of $83.86, just a dime below Thursday’s seven-year high of $83.96. It rose by 1.8% for the week. This is a total nine-week increase of 34%.

The global standard for oil was London-traded crude. It settled at $83.53, up 92cs or 1.1%. Brent reached an all-time high of $86.10 Thursday, a record for the past three years. The seven-week increase of 15% was almost 1%.

On Thursday, Crude prices saw their sharpest fall in 2 weeks after Russian President Vladimir Putin stated that the OPEC+ cartel (which includes Moscow) might release more barrels then it announced.

The oil price fell as China and India resisted rising energy costs, which could cause runaway inflation in their countries. Forecasts showed that the United States would experience a warmer winter than average, adding to pressure on the energy market.

All these factors have caused the natural gas and coal price to drop from highs in recent weeks.

Oil markets recovered strongly Friday, despite the fact that attention was returned to the plummeting inventory at Cushing, Oklahoma’s storage hub for crude oil.

“The issue is that there is not going to be any opportunity to restock Cushing in the next 3-5 months as  runs  should stay high,” said Scott Shelton, energy futures broker at ICAP (LON:) in Durham, North Carolina. “But it will be a volatile trade.”

In its weekly inventory update on Wednesday, the U.S. Energy Information Administration put the Cushing stocks at 31.2 million barrels, down from the previous week’s three-year low of 33.6 million.

EIA also reported that crude oil production fell by 431,000 barrels during the week ending Oct. 15. This is in contrast to analysts’ predictions of an increase of 1.857million barrels.

The EIA announced a weekly rise in crude oil stocks for the first time since the beginning of the month, following a series of build-backs that had added 13 million barrels in inventories.

Crude wasn’t the only component of the report to register declines. 

The EIA reported that 5.368 Million barrels fell, which is lower than the expected draw of 1.267million barrels.

According to the inventory report, stockpiles of diesel and were down by 3.913million barrels per week, contrary to expectations.

Calendar of Energy Markets

Monday Oct 25,

Private Cushing crude inventory estimations

Tuesday 26 October

Weekly update on oil stockpiles

Wednesday, Oct 27

EIA Weekly Report

EIA Weekly Report

EIA Weekly Report  

Thursday, October 28

EIA Weekly Report

Friday, October 29

Baker Hughes survey every week

DisclaimerBarani Krishnan doesn’t hold any positions in securities and commodities that he discusses.