Gold & silver’s “reaction” was to drop when the news hit the tape. Here’s an update, the press conference, and why any weakness here is a gift…
We know what they always do no matter what.
They always just gotta hit that sell button!
And hit it they did:
As soon as the FOMC statement hit the tape, gold & silver immediately plunged (after having faded since after 10 a.m.).
What did the Fed do?
The Fed raised rates the expected 25 basis points, and therefore the floating range of the Fed Funds Rate will be between 2.25% and 2.5%, so call it 2.375%.
The Dow was not liking it and had a knee-jerk plunge as well:
Either the Dow’s knee-jerk reaction is correct, or gold & silver’s knee-jerk reactions are correct.
Unfortunately, the outcome of this FOMC is the “worst” possible outcome for gold & silver’s potential for an immediate rally (even though none of the outcomes are truly bad for gold & silver).
More on that later.
Here’s are the changes to the statement (also known as the “red line”):
For those so inclined to read the full statement, without the red line, or for those having trouble sleeping who would like a natural sleep-aid of reading Fed blabber, click here.
This FOMC includes a Jerome Powell presser.
You can view it on the embed below:
The Fed is trying to pull off exactly what I forecast they would – the Fed has raised rates, yet by dialing back the projected path of rates (from 3 rate hikes in 2019 to now signaling just 2 rate hikes), they are attempting to appear dovish and discreetly trying to keep the markets guessing with this combo of a rate hike and a dovish appearance.
In other words, this is scenario 2 I laid out earlier (Rate hike with dovish Fed).
The question is will the Fed be dovish enough?
If the Fed is too dovish, I would be looking for gold & silver to rally earlier than later.
If the Fed is not dovish enough, I would be looking for gold & silver to maintain as the stock market continues to decline, with gold & silver catching a bid after some more market decline.
If the Fed is “goldilocks” in their dovish appearance, I would expect more of the same sideways churning action until the markets finally get it.
The dollar popped for its knee-jerk:
The dollar even popped above 97 again.
Remember: Knee-jerk reactions take time to work themselves out, and the knee-jerk reaction is often not the actual, eventual direction of the move.
Here’s the bottom line: Any weakness in gold & silver here is a gift.
Why is it a gift?
Because we know the metals are ultimately going to rally.
When gold & silver finally do rally, in my opinion, they will break to the upside hard and fast.
Because no matter what the Fed does at this point, it is all bullish for gold & silver.
It is not a question of if.
It’s a matter of when.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.