Specifically, the median Federal funds rate target was increased to 4.0% from 3.5% by 2023. More importantly, a stronger consensus emerged among FOMC members for another 25 bps hike this year, with Goldman Sachs and BofA adjusting their outlook for a December hike to October. A fourth rate hike this year is priced-in at a 50% probability.
A stronger dollar continues to limit the upside for precious metals. The dollar and short-term U.S. interest rates both rose following the Federal Reserve’s decision to raise interest rates. The opportunity cost of holding dollar-denominated rates relative to gold rose, thereby placing downward pressure on gold prices.
Gold prices rose on Thursday as some of the recent gains in crude oil prices abated. The decline in the crude oil prices lessens the risk that the Federal Reserve would need to implement an even more restrictive policy to rein in inflation. Tensions between the West and Iran continue to drive investors to the safety of gold.
Industrial metals, like silver, are more negatively affected by an expanding global monetary policy.
From a broader perspective, the upcoming question for the gold and silver markets will be what the Federal Reserve does in October after increasing interest rates in September.
