Fed Day: Where to for Gold, Silver?

investing.com:

Whichever way the Fed leans today — a 25 basis point hike or another pause — there will be consequences for risk assets from the dollar’s response, with precious metals led by gold and silver possibly showing the most magnified reaction among commodities.

In one of the most unified consensus on what the Federal Reserve is likely to decide for July interest rates, the odds for a hike stood at 99.2% in the morning previous to the announcement.

Indeed, if the Fed decision, due at 14:00 Eastern (18:00 GMT), shows a quarter-point hike for this month, expect stock, energy and metals prices to take a brief hit before they quickly calm to focus on the “real event” of the day — Chair Jay Powell’s outlook on rates going forth. 

That’s because since the possibility of a July rate increase gained traction a month ago, there had always been the likelihood of two hikes before the end of the year as per the Fed’s dot plot projections. 

Powell admitted as much in June — during the first pause of a 15-month hike cycle — that the combination of GDP, labor, wage and consumer data will guide the Fed hereon. But he also said the overarching objective was to get inflation back to the long-term target of 2% per annum. On that score, the 3% annual reading for the Consumer Price Index in June showed the central bank had more work to do — though last month’s CPI growth itself was the slowest in two years.

But if the Fed maintains its hold on rates, on grounds that natural forces of the economy will right the situation, expect an immediate across-the-board rally in risk assets. With almost everything from stock to oil prices extending their highs, the new inflationary pressure that will be created could just make the central bank’s work a lot