Make Kitco Your Homepage

PCE disinflationary but metals flat - rate hike next

Commentaries & Views

Last week I wrote that stock bulls had a weekly closing target of 4100 on S&P futures and they hit that level about 30 minutes before the close on Friday. I've noted that I think consideration should be given to whether a bull market is back on, if the descending trendline, going back to spring of 2022, is breached.

The below chart of the S&P shows that it clearly has happened, despite encountering resistance at that 4100 level.

The question is whether the final upcoming 25 bp hike, now 100% priced, is the last before a pause will be a "sell the news event" in stocks. This could lead to a sideways churn for a while, with the October 2022 low intact as the market digests a pause. On the other hand, the market could degrade into lower lows if disinflation does not continue during said pause, forcing the FED to forward guide further tightening?

A corresponding sell-the-news event in gold would lead to a pullback to the $1880 area, in my opinion. The price is now meandering at the upward-sloping consolidation box we have been showing and stochastic RSI is likely looking to fully stretch into oversold conditions.

I was wrong about gold and silver stretching back to the top of their ranges on Friday intraday – although the prediction of a disinflationary PCE reading did materialize, price did not follow; could this be foreshadowing "sell the news" downward pressure ahead? Participants should brace for a bout of upcoming volatility, and the medium-term direction in a few asset classes should be clarified post-FOMC meeting.

Thanks and have a great week!

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.