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Hawkish Fed bares it's talons

Jonathan Da Silva

Kitco Commentaries | Opinions, Ideas and Markets Talk

Featuring views and opinions written by market professionals, not staff journalists.

Commentaries & Views

In what seems like a repeat of the run-up to the March rate hike, the FED is taking every bit of slack the market will offer it to talk as hawkish as possible. Part of the FEDs "operation soft landing" is to prepare the market for tighter monetary conditions rather than shock it.

The FEDs "forward guidance" strategy is working, as evidenced by the significant move higher in Treasury yields. Equities and metals alike were hammered down yesterday intraday following Chair Powell's reinforcement of the idea of an upcoming 50bp hike.

The gold to silver ratio is on the cusp of breaking out higher. Although metals bulls have succeeded in mitigating the breakout in early trading this morning, the below weekly chart shows that the ratio is beginning to gain upside momentum.

A zoomed-out view of the S&P below shows the significance of the congestion area within which price is currently trapped. We can see that despite tighter financial conditions, however, the S&P has gone practically sideways since July 2021.

The downright ugly intraday reversal in the equity market yesterday (on a rejected breakout of the wedge we had been showing) should do a lot to crush lingering bullish sentiment and any hope of a quick continuation back to the all-time highs. An undercut of the April 18 low would reinforce bearish sentiment. Equities may continue the grind within the yellow highlighted box, setting the stage for a relief rally once the 50bp hike is actually executed.

Thanks and have a great weekend,

By Jonathan Da Silva

Contributing to kitco.com

Contact jdasilva@kitco.com
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.