Nervous Fed To Give Precious Metals Markets A Boost

The Fed’s Open Markets Committee met last week and left policy unchanged – at least for the moment.

No one expected central banking officials to make rate adjustments last week with equity prices rubbing up against all-time highs and the economic recovery narrative still dominant.

Central bankers are likely getting nervous, however. Treasury yields are surging, and it is only a matter of time before stimulus-addicted markets throw another tantrum.

In fact, the S&P 500 index fell after Wednesday’s announcement and each of the following two days.

Rising yields are also creating headwinds for precious metals, at least in the futures markets. Prices are having trouble getting anything going to the upside in recent weeks.

But, they aren’t falling either. That’s saying something.

The US dollar index has been getting stronger in addition to rising rates. Those two things usually represent a double whammy for gold and silver prices. Perhaps the Wall Street creatures running the machine trading no longer find that any reason is a good reason to sell metal.

Now certainly seems like a good time for naked short-sellers to think twice before shorting more metal. For starters, there are many longs standing for delivery of the metal. A short squeeze isn’t off the table – especially in silver.

Rising yields are telegraphing higher inflation. So are rising commodity prices. And Congress has now jumped on the stimulus bandwagon with the Fed. It’s not a good time to be shorting the “go-to” inflation hedges, such as gold and silver.

The US dollar may be stronger relative to other paper currencies, but its purchasing power is in sharp decline. This reality appears to be dawning on Wall Street.

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Description automatically generatedThe Fed has been obsessed with stock prices and so far stocks have held up well in the face of rising interest rates. Equities have been a primary beneficiary of the Fed’s inflationary policy, thus far.

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