(Kitco News) \u2013 The Federal Reserve\u2019s \u2018hawkish hold\u2019 was good news for gold and silver prices on balance, though it also served to push out the uncertainty surrounding inflation, interest rates and the broader market until after the summer, likely leaving the precious metals consolidating in their recent ranges for a little while longer, according to experts.<\/p>\n
Jesse Colombo, independent precious metals analyst and founder of the BubbleBubble Report, said precious metals breathed a sigh of relief after the Fed held rates steady.<\/p>\n
\u201cWhile higher interest rate expectations typically put downward pressure on precious metals, since they do not earn a yield, they have held up quite well in spite of that,\u201d he wrote. \u201cThis resilience suggests that a great deal of pessimism has already been priced in, and I would argue far too excessively.\u201d<\/p>\n
Colombo said the technicals suggest gold and silver are now set up for a potential rebound.<\/p>\n
\u201cEarly last week, gold broke out of a triangle pattern that many bearish commentators had expected to resolve to the downside, with calls for a move well into the $3,000s,\u201d he noted. \u201cInstead, the opposite occurred, which I view as a clear win.\u201d<\/p>\n
He said the breakout remains valid, although there has not yet been much upside follow-through, and cautioned that \u201cwe are in the heart of summer, when trading volume is light and conditions are thin as much of Wall Street is in vacation mode, so there is not much \u2018juice\u2019 right now to push precious metals significantly higher, though will change as we move into September.\u201d<\/p>\n
Colombo said he wants to see gold push decisively above $4,100 as further confirmation of strength and the triangle breakout. \u201cI then want to see it clear the next hurdle at $4,300 to $4,600,\u201d he wrote. \u201cA strong break above that zone would be a strong signal that the recent weakness has run its course.\u201d<\/p>\n
Meanwhile, silver\u2019s breakout from the triangle last week also remains intact. \u201cI am now looking for further bullish confirmation in the form of a move above the $60 to $70 resistance zone just overhead, which would allow the rebound to fully gain traction and signal that the correction is over,\u201d he said, adding that this may require trading volumes to pick up after the summer.<\/p>\n
Economists Christopher Hodge, John Briggs and Selin Aker of Natixis wrote that this Fed meeting was the first to include the \u2018family fights\u2019 that Warsh has been predicting, with three regional presidents dissenting in favor of a hike.\u00a0\u00a0<\/p>\n
\u201cThese dissents are not a shock given previous public statements from these three suggesting that the current policy stance is not sufficient to bring inflation down to the Fed\u2019s target of 2%,\u201d they wrote. \u201cThree dissents could be viewed as mildly hawkish, but these dissenters will not necessarily be driving policy and we think the cleaner signal is that all Board Governors and New York Fed President John Williams were all on board for a pause.\u201d<\/p>\n
They noted that apart from the line that the Committee is now \u201ccontinuing its policy of ample reserves\u201d as opposed to \u201creaffirming\u201d the policy previously, the official statement was unchanged from June.<\/p>\n
Following the hold, Natixis\u2019 view of the market is relatively unchanged. \u201cWe felt that a hawkish hold (as exhibited by 3 dissents and Warsh\u2019s press conference) would mostly serve to just push out market pricing for the Fed (and market uncertainty around the Fed\u2019s reaction function) as we wait for the next CPI report, to be received on August 12th,\u201d they wrote. \u201cAdditionally, while not our official call, it is understandable that the market leaves a September hike on the table (currently ~60% chance of a 25bp hike), given the three dissents and Warsh\u2019s repeated comments on achieving price stability.\u201d<\/p>\n
The economists said the net result is that July\u2019s uncertainty has merely been pushed out to September. \u201cBetween now and the September meeting however we will receive two more CPI prints, and obviously this also gives the FOMC more time to evaluate the past impact, and the future fate of, oil prices given the Iran War,\u201d they wrote. \u201cNatixis Economics sees the policy rate on extended hold given their inflation outlook.\u201d<\/p>\n
Marc Chandler, managing director at Bannockburn Global Forex, said the FOMC decision looked like a hawkish hold, but it seemed like the more Chair Warsh affirmed the central bank\u2019s commitment to achieving the inflation target, the more short-term interest rates and the dollar fell.\u201d<\/p>\n
\u201cGold was already recovering from the dip below $4000 in the North American morning but surged after the FOMC decision,\u201d he noted. \u201cIt reached a little above $4116, a new three-day high by a few cents, but could not sustain the momentum and finished slightly below the 20-day moving average (~$4072 today). It was greeted with sellers today as it tried pushing above $4100. Silver settled firmly, up almost $1, but failed to impress. It is consolidating inside yesterday\u2019s range.\u201d<\/p>\n
Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management, told Kitco News that Warsh is putting his own stamp on the Fed by keeping the statement short and nearly identical to the one from the June meeting, the only addition a note about the three dissentions in favor of a hike.<\/p>\n
\u201cHe has been very clear about focusing on inflation, explicitly and implicitly, and went further than any Fed chairman in recent memory by specifically stating 2% (and not any higher) was the Fed\u2019s inflation goal,\u201d he noted. \u201cThis could be considered a hawkish hold because they didn\u2019t change rates, but they continued to highlight price stability as the biggest risk and downplayed any risks to employment.\u201d<\/p>\n
\u201cIf the upcoming data shows that inflation is moderating \u2013 and this is likely given the high values we saw last year, which will be easier to meet or beat this year (e.g. the year-over-year comparisons become easier) \u2013 then we could see a Fed on hold for this entire year (despite 2 rate hikes which are currently priced in) and that would be bullish for the stock market into year-end,\u201d Zaccarelli said.<\/p>\n
Disclaimer:\u00a0The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and\/ or damages arising from the use of this publication.<\/p>\n","protected":false},"excerpt":{"rendered":"(Kitco News) \u2013 The Federal Reserve\u2019s \u2018hawkish hold\u2019 was good news for gold and silver prices on balance,…\n","protected":false},"author":2,"featured_media":567566,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[13286,13278,13282,1152,13277,4404,13280,13279,13281,12858,1247,42,13285,6453,13269,13287,13274,13288,13276,43,13271,13272,13270,13273,238,13275,13284,450,2796,13283,40,38,41,39,7549],"class_list":["post-567565","post","type-post","status-publish","format-standard","has-post-thumbnail","category-headlines","tag-bank-forecasts","tag-bitcoin-news","tag-central-banks","tag-charts","tag-crypto-news","tag-currency","tag-economic-reports","tag-ethereum-news","tag-forecasts","tag-global-economy","tag-gold","tag-headlines","tag-international-policy","tag-interviews","tag-kitco-news","tag-market-nugget","tag-metals","tag-mining-minutes","tag-mining-news","tag-news","tag-palladium","tag-pgm","tag-platinum","tag-platinum-group-metals","tag-politics","tag-precious-metals","tag-rare-earth-metals","tag-roundups","tag-silver","tag-tech-metals","tag-top-news","tag-top-stories","tag-topnews","tag-topstories","tag-us-dollar"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/567565","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=567565"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/567565\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/567566"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=567565"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=567565"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=567565"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}