|

Commodity prices surge on hopes of Fed pivot – What’s next? [Video]

Historically, the final quarter has always been considered to be one of the most profitable periods of the year for commodity traders – And once again, that trend, is certainly living up to expectations!

Another week and another hotly antipated money making opportunity. That’s one of the most exciting and lucrative trends of the current financial climate that we find ourselves in right now.

Last week, Japanese policymakers were forced to intervene in markets after the yen tumbled past the key psychological level of 150 to the dollar. The intervention, came as the dollar hit a fresh 32-year high – inversely pushing the Japanese currency to its lowest level since August 1990.

On Friday, the Bank of Japan dumped an estimated $30 billion worth of its U.S dollar reserves in a frantic attempt to protect the yen from yet more weakness. The move triggered a flash crash in the U.S dollar, while simultaneously igniting an explosive rally across multiple asset classes that trade inversely to the U.S currency including a list of Commodities from the precious metal to energies.

The aggressive move by Japanese authorities wasn't the first and definitely will not be the last.

This is the second time Japanese policymakers have stepped into the market since September to prop up the yen – which has lost almost 30% of its value against the dollar year-to-date because of the widening gap between U.S and Japanese monetary policy.

With ample firepower totalling almost $1.2 trillion – traders anticipate any renewed strength in the U.S dollar will inevitably spark further interventions from the BoJ – officially confirming that a new currency war – is now in play.

There is no denying that a rising dollar is whipping up an inflationary storm both in the U.S and internationally, wreaking havoc across every corner of the economy.

According to Morgan Stanley – “such U.S dollar strength has historically always ended in some kind of financial or economic crisis” and that's the exact direction we are heading in again.

In recent weeks, a long list of Wall Street banks and international organization from the United Nations, World Bank and IMF warned that an overly aggressive Fed tightening policy, combined with a surging U.S dollar – “risks breaking the financial markets and inflicting worse damage globally than the financial crisis in 2008 and the Covid-19 shock in 2020”.

According to economists at Goldman Sachs, the Federal Reserve is now only “one or two rate hikes away” from unleashing a global financial meltdown.

Sooner or later the Fed will have no other option, but to pivot.

Traders have already priced in another 75 basis-point hike when Fed policymakers meet in November. But the big question is will the Fed raise rates one more time this year, before reverting back to quantitative easing again?

Only time will tell, however, the one thing we do know is that extraordinary times create extraordinary opportunities and right now, as traders we are amidst “one of the greatest eras of wealth creation the world has seen”. My advice to you is, do not waste this opportunity!

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

Author

Phil Carr

Phil Carr

The Gold & Silver Club

Phil is the co-founder and Head of Trading at The Gold & Silver Club, an international Commodities Trading Firm specializing in Metals, Energies and Soft Commodities.

More from Phil Carr
Share:

Editor's Picks

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.


Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations
Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.
BoJ recap: A pause for now... but Japan has entered a new inflation phase
The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.
The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.