Fed policymakers opted for another 25 basis-point hike — disappointing investors who had hoped for a pause in the wake of high-profile bank runs.
Stocks sold off in post-Fed trading on Wednesday afternoon. Precious metals markets, however, managed to record gains for the day.
Fed chairman Jerome Powell signaled that the central bank would likely hike one more time.
After months of rate increases that have ratcheted the Fed funds up from effectively zero to its current 4.75 – 5.0%, and not knowing when the tightening campaign would end, investors can finally see some light at the end of the tunnel.
Markets are even beginning to price in a likelihood of rate cuts by the end of the year. Powell denied that the Fed is expecting to have to reverse course on rates, but his hand could be forced by a worsening banking contagion and deteriorating economy.
The Fed's final capitulation on interest rates could coincide with a breakout in gold to new all-time highs.
The battle line has been drawn at the $2,000 level. Bears eye it as an opportunity to put in sell orders. Bulls see the potential for a decisive break above $2,000/oz to serve as a springboard for an epic run higher.
Gold faces resistance between $2,000/oz and $2,100/oz where prices got capped last year and in the post-pandemic run-up of 2020. Once those peaks are taken out decisively, there will be no ceiling for gold – and $2,000/oz could become the new floor.