Fed Continues Tough Talk, but Gold & Silver Show Resilience

Precious metals investors remain cautious following the Federal Reserve’s latest jumbo rate hike.

On Wednesday, the Fed announced another three-quarter point bump up on interest rates. It’s the sixth straight hike by central bankers and brings the Fed funds rate up to 4%. That’s the highest it has been since 2008.

Investors fully anticipated the Fed’s latest move but hoped it would be accompanied by a dovish statement from Chairman Jerome Powell. Instead, Powell threw cold water on the idea of a pause or pivot at the FOMC’s next meeting. In his remarks, he sounded less like a dove and more like a grinch who was preparing to severely punish Americans for the Fed’s past mismanagement and impose more pain to financial markets as the holiday season approaches.

Of course, thanks to the Fed’s reckless actions over the past three years, Thanksgiving celebrations will be a lot more expensive this year than last as a result of dramatic food price increases. Powell admitted that the Fed has so far failed to contain inflation and warned that more tightening than previously forecast is coming… but, as you would expect, he didn’t acknowledge the Fed’s central role in creating the problem in the first place.

Jerome Powell: My colleagues and I are strongly committed to bringing inflation back down to our 2% goal. If we don't get inflation under control because we don't tighten enough, now we're in a situation where inflation will become entrenched. We have both the tools that we need and the resolve it will take to restore price stability on behalf of American families. It is very premature to be thinking about pausing. So, people, when they hear lags, they think about a pausing. We still have some ways to go, and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected.

In the face of increasingly tough talk from Fed policymakers, gold and silver markets have been showing some resilience. Instead of breaking down sharply to new lows this fall, they have settled into trading ranges. Today we’re seeing big advances in the money metals, and they’re both in now green territory for the week.

This week gold prices are up 1.6% to trade at $1,678 per ounce. While gold has spent a lot of time recently trading near the bottom of its range, silver is showing some relative strength and remains well off its lows for the year. As of this Friday recording, and in big part due to today’s rally, the white metal is putting in a weekly gain of a robust 6.4% or over a $1.50 to bring spot prices to $20.75 an ounce.

Turning to the PGMs they’re both underperforming. Platinum is off a slight 0.4% since last Friday’s close to trade at $956. And finally, palladium is looking at a loss of 3.7% this week to come in at $1,900 per ounce.