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Silver Near Three-Month Lows as Markets Await Fed’s Rate Hike, Powell Comments
Silver finds itself well below $23 an ounce at levels not seen for almost three months as investors punish non-yield bearing assets such as precious metals in an environment where central banks in the US and Europe are expected to implement a series of interest rate hikes over the course of the year.
Today is expected to bring confirmation of the Federal Reserve’s largest rate hike since 2000 with the Bank of England likely to raise its benchmark rate to the highest in 13 years tomorrow.
But while these moves are fairly well priced in with investors having already meted out their punishment to silver over the last couple of weeks, where the metal goes to from where will be determined by the comments of Fed Chair Jerome Powell that will follow the committee’s rate decision. Read More
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Fed’s Expected Rate Hike Keeps Gold Under Pressure at Lowest Since Before Ukrainian War
All eyes are on the Federal Reserve today ahead of a near-certain hike in the interest rate by 50 basis points, which would be the largest increase since 2000.
As well as the confirmation of that move, investors will also be closely scrutinizing Fed Chair Jerome Powell’s comments in the press conference that will follow the Federal Open Market Committee’s rate decision to understand the trajectory of future interest rate moves as well as how fast the US central bank intends to reduce its balance sheet.
In such a hawkish environment gold has fallen out of favor among investors with the price languishing well below $1,900 an ounce at levels last seen in mid-February, prior to Russia’s invasion of Ukraine.
The outbreak of war triggered a rush to safe-haven assets such as gold but while there is no sign of an end to the fighting in Ukraine, by now investors have priced in the financial risks posed by the conflict and have reduced some of the fear-based trading as a result. Read More
Gold price turns positive as Fed raises interest rates by 50 basis points
Gold prices have pushed into positive territory as the Federal Reserve makes its biggest rate hike in 22 years.
As expected, the U.S. central bank raised interest rates by 50 basis points, pushing the Fed Funds rate to a range between 0.75% and 1%. Also as expected the Federal Reserve will reduce its balance sheet by a total of $47.5 billion.
The gold market is seeing some positive movement in initial reaction to the latest monetary policy statement. June gold futures last traded at $1,875.60 an ounce, up 0.28% on the day.
The Federal Reserve struck an optimistic tone in its monetary policy statement even as it noted that economic uncertainty remains high because of Russia’s invasion of Ukraine. The U.S. central bank also said that is it looking past the 1.4% decline in GDP seen in the first quarter of 2022.
“Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong. Job gains have been robust in recent months, and the unemployment rate has declined substantially,” the Federal Reserve said. Read More
Commodities at risk of reversing massive gains with 'wild run' similar to 2008, gold price to take on $2k - Bloomberg Intelligence
The commodity market is at risk of a reversal that will be a volatile ride similar to 2008, according to Bloomberg Intelligence. In this scenario, gold looks like one of the best options, with the ability to breach $2,000 once markets identify the end of the Federal Reserve rate-hike cycle.
"Commodities are at increasing risk this year of a wild ride akin to 2008, a development that may shine on gold," Bloomberg Intelligence senior commodity strategist Mike McGlone said in his May outlook report. "Commodities climbed 50% in the past 10 years and the Producer Price Index is up 30%. Gains are likely to recede as the world faces a potential recession and the Fed tightens the reins … Rate hikes should coincide with peak inflation."
One of the conclusions is that price spikes in the commodity market can often lead to their own "demise," wrote McGlone. He explained: "Demand destruction typically results from higher prices, and supply elasticity brings on more production. It's typically a matter of time. The 1Q crude oil peak appears akin to the 1990 apex, which didn't return for about 14 years, and 2008 high, which remains the record."
In this outlook, the gold market looks solid. The precious metal can breach the critical psychological level of $2,000 an ounce once markets identify the end of the Fed's hiking cycle.
"Federal Reserve jawboning amid global GDP downgrades and a declining stock market isn't good for prices of copper and other industrial metals, and the endgame appears tilted favorably to gold. When fed funds futures start anticipating a rate-hike cycle end, the precious metal should breach $2,000- an-ounce resistance," McGlone stated. Read More
Gold sees modest rally following mildly dovish FOMC statement
Gold prices are steady to firmer in early-afternoon U.S. dealings Wednesday, supported by the conclusion of the U.S. central bank meeting this afternoon that was deemed just a bit dovish. Gold prices were modestly down just prior to the FOMC statement's release. June gold futures were last up $1.50 at $1,871.80 and May Comex silver was last down $0.136 at $22.46 an ounce.
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Technically, June gold futures see a three-week-old price downtrend in place on the daily bar chart. Bears have the overall near-term technical advantage. Bulls' next upside price objective is to produce a close above solid resistance at last week's high of $1,935.50. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $1,800.00. First resistance is seen at $1,883.00 and then at $1,900.00. First support is seen at this week's low of $1,849.70 and then at $1,835.00. Wyckoff's Market Rating: 4.0. Read More
Gold and bitcoin jump as Fed's Powell takes 75bps hike off the table in June
There was a significant rally in gold, bitcoin, and the U.S. stock market as Federal Reserve Chair Jerome Powell ruled out a 75-basis-point rate hike at upcoming meetings, contradicting market expectations for June.
Powell made his comments during a press conference that followed Fed's decision to raise rates by 50 basis points — the biggest rate hike since 2000.
"A 75-basis-point increase is not something the committee is actively considering," Powell told reporters Wednesday. "[We are moving] policy rate expeditiously to more normal levels. Additional 50bps increases should be on the table at the next couple of meetings. We'll make our decisions meeting by meeting as we learn from incoming data. The overarching focus is ... to bring inflation down to our 2% goal."
Despite the U.S. economy contracting 1.4% in the first quarter, Powell said there was a "good chance" for the Fed to achieve a "softish landing" as it aggressively tightens monetary policy this year. Read More
Reading between the lines; FOMC statement and Powell's Press conference
The Federal Reserve concluded the May FOMC meeting and, as expected, announced that it will raise its Fed funds rate by 50 basis points (1/2%). While much of their monetary policy's forward guidance remained straightforward and transparent there were subtle changes in the statement released as well as Chairman Powell's words he used during the press conference. As always with the Federal Reserve, the devil is in the details, and sometimes the details are ambiguous at best.
There were a couple of very subtle changes in Chairman Powell's words. One of the major changes was that he spoke about the Federal Reserve's ability to raise interest rates and have the economy experience a soft landing. Today he replaced the word soft landing with "softish landing" acknowledging the potential economic fallout because of the number of rate hikes needed to have an impact on inflation. Another subtle change was when he addressed the primary cause of inflation, which is supply chain issues, acknowledging that the Federal Reserve cannot impact those issues, which makes reducing inflation by the Federal Reserve very "challenging."
There were some major details revealed in the statement and press conference. During the press conference Chairman Powell addressed the possibility of larger rate hikes than a 50-basis point hike, saying that a rate hike of "75 basis points is off the table". That statement created bullish market sentiment for both gold and U.S. equities. Read More
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Disclaimer: These articles are provided for informational purposes only. They are not offered or intended to be used as legal, tax, investment, financial, or any other advice.
