Top in interest rates or top in gold?
What mattered was what was said later.Powell's 0.25% hike was expected, so when it became a reality, markets didn't really react. But what changed was the narrative regarding the future price moves. Powell said that they will make further decisions based on the data that they get. So, Powell is no longer saying about further increases but about being data-dependent. The latter is irrelevant because the Fed is always data-dependent, at least in theory .
In both cases, real interest rates are going to increase. So, both outcomes presented by Powell are bearish for gold and the rest of the precious metals sector.Join our community and read the latest analyses and groundbreaking opinions from market experts. Gain exclusive access to valuable insights, engage in thought-provoking discussions, and stay on top of what's trending in the financial markets.
Please note the contrast between the current expectations and what I wrote above as the scenarios that Powell pretty much revealed. So, what does that all imply? That the market is likely to be surprised – negatively so. It's obvious also from the technical point of view, and I've been writing about the bearish stock price forecast for quite a long time now.
As I explained above, the real interest rates are likely to go higher, which means that gold is likely to go lower. The reason why gold moved higher in the previous months is likely due to the overall situation on the market – the move from the “bull trap” to the “return to normal” stage of the bear market. And now – with the following moves in interest rates and inflation, it's likely to become clear what is really happening and what's not.
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