Following last night's U.S. missile attack in Syria as a punitive response for the perceived use of sarin gas against civilians, gold and silver both rose more than 1% to end overnight trading above their 200 day moving averages, and above hard resistance levels that had taken five months to recover to.
It was not clear what was the catalyst for the sharp move, however shortly before the move Bill Dudley spoke, discussing the future of the Fed's balance sheet:
- FED'S DUDLEY: RATES WILL BE PRIMARY POLICY TOOL, NOT 'GRADUAL' BALANCE SHEET REDUCTION
- FED'S DUDLEY: PORTFOLIO RUN OFF WILL NOT BE 'ACTIVE' TOOL OF MONETARY POLICY
- FED'S DUDLEY: ONE REASON TO SHED BONDS IS TO LEAVE OPEN OPTION TO EXPAND BALANCE SHEET IN FUTURE
- FED'S DUDLEY: LIKELY WON'T RETURN TO PRE-CRISIS SIZE BOND PORTFOLIO
- FED'S DUDLEY: PREFERS RETAINING CURRENT 'FLOOR' POLICY MECHANISM IN FUTURE, WITH PERHAPS $500 BLN - $1 TRLN IN EXCESS RESERVES
in which he pointed out that balance sheet normalization would likely lead to only a "little pause" in rate hikes to avoid concurrent policy moves.
- FED'S DUDLEY: REPEATS EXPECTS TO BEGIN SHEDDING BONDS LATER THIS YEAR OR NEXT YEAR
FED'S DUDLEY: SHEDDING BONDS MAY LEAD ONLY TO 'LITTLE PAUSE' IN RATE HIKES; PERHAPS AVOID SIMULTANEOUS POLICY MOVES - Zerohedge