Fischer's Resignation And Gold

Last week, Stanley Fischer announced that he would resign from his position as the U.S. Federal Reserve Vice Chair in mid-October. What does it mean for the Fed and the gold market?

It was a hot week, so some investors may have missed information about the resignation of the Fed Vice Chair Stanley Fischer. On Wednesday, the veteran central banker said that he would step down for personal reasons from his position effective on or around October 13, 2017, eight months before his term as vice chair expires in June.

What does it mean for the gold market? First, Fischer’s departure could accelerate Trump’s opportunity to reshape the Fed, as his resignation will leave the seven-person board of governors with merely three sitting members (actually four, as Trump nominated Randal Quarles to the board in July, and the Senate approved this nomination last week). Hence, President could significantly influence the future Fed’s course by filling vacancies in the Board.

Second, Fischer was considered a centrist and a reliable ally of Janet Yellen, but perhaps with a slightly hawkish bias. Therefore, his resignation should not significantly shift the balance of votes on interest-rate decisions, but it could slightly decrease the probability of a Fed hike in December at the margin. The current market odds of such a move are about 40 percent.

The key takeaway is that Stanley Fischer, number two at the Fed, announced his resignation mid-October due to personal issues. His stepping down follows Tarullo’s resignation and has prompted some analysts to speculate that “rats are abandoning the sinking ship”. We wouldn’t go as far, but one thing is certain: Fischer’s resignation creates further room for Trump to reshape the Fed’s policymaking staff. However, since Fischer was generally perceived as a centrist, his absence should not importantly move the gold market. A lot depends on the future composition of the FOMC.

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