Another day and another highly anticipated money making opportunity. That’s one of the most lucrative trends of the current financial climate that we find ourselves in right now.
A recent string of data shows that America’s inflation problem is definitively getting better. That’s good news for Jerome Powell and his colleagues at the Federal Reserve.
Last week, The Bureau of Labor Statistics reported that a key measure of inflation – watched closely by the Fed rose 0.2 percent for a second straight month in a row. That marked the smallest back-to-back monthly increase in more than two years.
There is no denying, that the progress on inflation, combined with steady economic growth and a gradually cooling labour market, represent a step in the right direction for the Federal Reserve.
This huge shift in macro sentiment has boosted expectation that the Fed will pause its interest-rate increases in September and as always traders will be scouring the Minutes from the FOMC’s July policy meeting for clues on the central bank’s next move.
Recent economic reports have shown a strong but cooling labor market, while inflation is down sharply from a year ago. Even so, Fed officials, mindful that annual inflation is still well above its 2% target, opted to raise rates a quarter of a percentage point at their July meeting. The decision nudged the federal funds rate to a range of 5.25% to 5.5% – the highest level in 22 years, up from nearly zero last year.
Since the July meeting, many key Fed officials have become increasingly more dovish. This has traders convinced that the Fed's historic interest rate hiking cycle is nearing its end.
In recent weeks, Philadelphia Fed President Patrick Harker has joined Atlanta Fed President Raphael Bostic in saying no more rate hikes are needed.
Meanwhile, other central bank officials, including New York Fed President John Williams, a vice chair and voting member on the Federal Open Market Committee, has begun discussing the timetable for possible rate cuts – even if that may not happen until early next year.
Interestingly, as the Fed inches closer to the end of its tightening cycle, the European Central Bank is only just getting started. As savvy traders know, this ultimately means one thing. ECB rate hikes will enviably strengthen the Euro and inversely weaken the U.S dollar – which present huge bullish tailwinds for precious metal prices ahead.
Whichever way you look at it, one thing is clear. The case for Precious metals in a well-diversified portfolio has never been more obvious than it is right now. Any substantial pullbacks should be viewed as buying opportunities because prices won't stay low for long!
Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:
Trading has large potential rewards, but also large potential risk and may not be suitable for all investors. The value of your investments and income may go down as well as up. You should not speculate with capital that you cannot afford to lose. Ensure you fully understand the risks and seek independent advice if necessary.
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