After an explosive start to the week, Gold prices are currently moving in a tight range as traders await a fresh fundamental spark to ignite the precious metals next big move.
This month marks the one-year anniversary since the Federal Reserve embarked on their most aggressive interest rate hiking campaign since the 1980s. Historically every time the Federal Reserve has engaged in an interest rate hiking cycle, they have kept going "until something eventually breaks”.
And that's the exact situation they find themselves in, once again!
Common wisdom would suggest, with the second and third largest bank failures in U.S history since the financial crisis of 2008 and worries of more to come – that would seem to qualify as a major breakage in the financial system and a pressing reason for the central bank to back off.
Not so fast.
The Federal Reserve’s dilemma over whether to press ahead with its aggressive interest rate hiking campaign or hit the pause button has been further complicated by the release of yet more, stronger inflation data.
Fed officials are due to gather for the most crucial FOMC meeting of this year on March 21-22, when they will decide how substantially to alter their plans for monetary tightening in light of the turmoil in the banking system triggered by last week’s collapse of three prominent U.S banks – Silvergate Capital, Silicon Valley Bank and Signature Bank.
But following the release of data this week, showing a 0.5% rise in “core consumer price inflation” in February despite a slowdown in the annual pace – the Fed must now thread a delicate needle of continuing to root out stubbornly high inflation – while also ensuring the smooth functioning of the financial system.
Unfortunately, the Fed is caught between a rock and a hard place. They are faced with a situation common to chess players down on their luck – stuck with nothing but bad moves to play.
On one hand, if the Fed continues hiking interest rates, then they ultimately risk breaking more things – if not in the real economy, then in the financial system. On the other hand, if the Fed suddenly changes course on rate hikes, that will inevitably lead to deeply entrenched inflation for longer.
If history is anything to go by, then the one thing we do know for certain is that precious metals don’t need a crisis to move higher, but they definitely loves a crisis!
Right now, both scenarios, whether that’s persistent Inflation or another economic shock – presents an extremely lucrative backdrop for precious metal prices ahead. That’s welcoming news for the bulls, but painful for anyone sitting on the sidelines, who must now decide how much FOMO they can handle.
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.
Follow us on Telegram
Stay updated of all the news
EUR/USD trims gains after reaching weekly highs at 1.0925 Premium
EUR/USD peaked at 1.0925 on Thursday, the highest level in a week, then retreated to the 1.0900 area. The pair is holding on to strong daily gains, on its way to the highest daily close since early February, supported by a weaker US Dollar ahead of Friday’s US Core PCE data.
GBP/USD eyes 1.2400 as Pound outperforms
The Pound is among the top performers of the American session. GBP/USD is trading at the highest level in almost two months, near 1.2400. Risk flows are helping the pair while at the same time making it difficult for the US Dollar to find demand.
Gold: Bulls aiming to challenge the $2,000 threshold Premium
Spot Gold found demand during American trading hours and currently trades around the $1,980 level. Following a consolidative stage, the bright metal gained upward traction on the back of continued US Dollar weakness.
Cardano might have a bumpy road following a 25% recovery
Cardano price has had a disappointing run these last two weeks when compared to other major altcoins.
FTSE100 up for 4th day in a row, hits 2-week high
We’ve seen another positive day for European markets with the FTSE100 pushing up to its highest levels in 2 weeks, although it remains well short of reversing its March losses, unlike the DAX which has reversed nearly all its post 9th March decline.