Gold Weathers Latest Rate Hike, Powell Projects Pain


Gold remained near lows not seen in over two years ahead of this week’s US Federal Reserve meeting.

Trading as high as US$1,686 per ounce ahead of the event, which ran from Tuesday (September 20) to Wednesday (September 21), gold sank as low as US$1,658 in the immediate aftermath before rebounding to the US$1,670 level.

Friday (September 23) brought an end to the yellow metal’s fairly steady showing, with gold falling to about US$1,640.

Investor attention has been on the Fed, which hiked interest rates by 75 basis points this week, putting the target federal funds rate at 3 to 3.25 percent. The already strong US dollar rallied to a 20 year high after the announcement, while 10 year Treasury yields reportedly rose to their highest since point since April 2010.

Powell more hawkish than ever after rate hike

Numbers are key when the Fed meets, but Chair Jerome Powell’s commentary is also always highly anticipated.

In a press conference after this week’s meeting, he reiterated that the Fed is committed to bringing inflation back to its objective of 2 percent, and will keep at it until the job is done. For context, the latest consumer price index reading shows that inflation was up 8.3 percent year-on-year in August.

“We have got to get inflation behind us. I wish there were a painless way to do that. There isn’t” — Jerome Powell, US Federal Reserve

Despite those forceful comments, Powell stopped short of projecting what will happen at the Fed’s gatherings in November and December, saying the plan is to take a meeting-by-meeting approach.

It’s also worth noting that after sidestepping recession questions in July, Powell now seems more willing to talk about it — this week he said no one knows whether the Fed’s process will cause a recession, or how bad it may be.

Some market watchers have more definitive views on what’s coming. I heard from Brien Lundin of Gold Newsletter, who said he thinks we’re at a turning point and the Fed will eventually have to admit it’s powerless to fight inflation.

He emphasized that Powell doesn’t have the same tools former Fed Chair Paul Volcker had in the 1970s, and said the massive amount of federal debt will prevent the central bank from pushing interest rates higher than the rate of inflation. Brien sees this as an opportunity to pick up beaten-down gold stocks — as long as they have money in the bank to support themselves.

“I think we are at a turning point. I think the Fed will be forced to admit essentially that it’s powerless to fight inflation because it can’t get interest rates higher than the rate of inflation. That of course is due to the size of the federal debt” — Brien Lundin, Gold Newsletter

Save the date — INN’s 2022 conference plans

As we wrap up, I want to share a quick note on events the INN team will be attending in the final months of 2022.

This week was a busy one with INN’s Georgia Williams at the Gold Forum Americas in Colorado, and Priscila Barrera attending two Fastmarkets conferences in Barcelona. I haven’t had a chance yet to get their full recaps, but we’re expecting to publish content from all three of those events next week. Stay tuned for those updates!

Looking at next month, I’ll be at the New Orleans Investment Conference for the first time in four years, which I’m really looking forward to. In November, Priscila will be at Benchmark Minerals Week in Los Angeles. We’ll have more details on these events as they approach, but for now feel free to send me an email if you have other events on your radar.

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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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