Investors in precious metals feel worried in the shadow of the Federal Reserve’s last big rate hike.
The Fed raised interest rates by another three-quarter point increase on Wednesday. The federal funds rate now stands at 4% after the central bankers’ sixth consecutive increase. It hasn’t been that high since 2008.
Investors already expected the Fed’s most recent action, but they thought Chairman Jerome Powell would support it.
Instead, Powell rejected the belief that the FOMC would pause or change course at its subsequent meeting.
In his remarks, he came across less like a dove & more like a Grinch who’d been getting ready to brutally punish Americans for the Fed’s previous incompetence and add additional agony to financial system as the holiday season draws near.
Thanksgiving celebrations this year will undoubtedly cost far more than last due to sharp spikes in food prices brought on by the Fed’s careless activities during the previous three years.
Powell acknowledged that the Fed has thus far failed to control inflation and said. That more tightening beyond what was initially anticipated is imminent.
He didn’t, However, acknowledge the Fed’s crucial role in first causing the issue, Which is to be expected.
Jordan Powell: “To get inflation back to our target of 2%, my coworkers and I are steadfastly devot. Inflation would become entrenched if we are unable to manage it because we have not tightened monetary policy enough. The benefit of American families, we can restore price stability because we have the necessary instruments and the determination to do so. Thinking about pausing at this point is really premature. People therefore consider pausing when they hear lags. We still have a ways to go, and new information since our last meeting points to a higher final level of interest rates than had been anticipated.”
Fight for Inflation
Markets for gold & silver have been somewhat resilient despite the Fed’s policymakers’ increasingly aggressive rhetoric. This fall, instead of precipitously falling to new lows, they have stabilised within trading ranges. The money metals are making significant gains today, and they are both currently in positive territory for the week.
The price of gold increased 1.6% this week to trade as $1,678 per ounce. Silver has shown some strength and is still far from its year-end lows, gold has recently spent a significant amount of time trading at the bottom of its trend.
As of this Friday’s report, the white metal has posted a weekly gain of an impressive 6.4%, or more than $1.50, bringing current prices to $20.75 an ounce, largely as a result of today’s advance.
As for the PGMs, both are underwhelming. Since last Friday’s closing, platinum has lost just 0.4%, trading at $956. Last but not least, palladium is forecast to fall by 3.7% this week and settle about $1,900 per ounce.
Interest Rate
In this challenging environment, it is understandable that many metals investors remain cautious. They are waiting for the Fed to eventually signal that it is prepare to stop raising interest rates. They also want the U.S. Dollar Index to finally make a sharp shift lower.
All of those things will eventually occur. However, there’s a considerable probability that metals markets will start to rise before any Fed turn or fresh decrease in the value of the dollar. It’s highly probable that the year’s lows for silver and other commodities have already been reached.
The outcome of the elections the following week may also alter market dynamics. Republicans have high hopes for a red flood that would win them the majority in the House & Senate.
Arizona is home to one of the elections that could determine which party holds the Senate. Republican Blake Masters is vying to oust Democrat Mark Kelly, who is currently in office. According to polls, the contest is now close.
Because Masters has supported bringing some integrity to the country’s fiscal and monetary systems, sound money proponents are paying close attention to this campaign in particular. Even more, according to Masters. He would repeal the provision in Congressman Alex Mooney’s measure that exempts gold and silver from income taxes.
Former Congressman Ron Paul. Who initiated the original Auditing the Fed bill and was a strong proponent of gold during his own time on Capitol Hill, has praised Masters.
If chosen, Masters would take over the Senate seat that John McCain had held for more than three decades. The sound economic movement has never counted Senator McCain as a significant ally. And to be honest, hardly many senators in recent memory have been.
It’s unlikely that the upcoming election will result in a significant change in how Washington approaches spending, lending, and currency creation. Investors will probably see it for what it is if Republicans win the Senate and re-install Mitch McConnel as Majority Leader: a continuation of a similar old, same old pattern.
No regardless of how many times Chuck Schumer & Mitch McConnel exchange the reins of power, the government’s catastrophic fiscal trajectory won’t fundamentally shift. Its only thing that is different right now is that the price of servicing the enormous amount of debt that the government is carrying will skyrocket
Leaders in Washington, D.C. are still trying to come to grips with the implications of the apparent end of the low interest rate period. By increasing the costs associated with borrowing fresh money into existence. The Federal Reserve hopes to discourage people from doing so.
However, other lawmakers, such as Bernie Sanders and Elizabeth Warren, are openly dissidents against the Fed’s apparent hawkishness. Others in Congress and the Biden government are quietly coming up with ideas to maintain high levels of borrowing and expenditure.
The types of budget sacrifices that households and companies are currently being forced to undertake. As a result of rising interest rates & sharply rising inflation are rarely discuss by politicians from either party.
The eventual outcome could be that the government borrows more money overall. Not less, in order to cover increased debt servicing expenses. And as a result, the already terrible inflation problem could get considerably worse.