At the end of this week's FOMC meeting today, the Fed announced another interest rate hike - this time raising rates by half a percentage point. Although this was less than the three quarter point hike in November, the Fed made clear that although it seems that inflation is slowing down, they plan to continue rate hikes into 2023 to achieve a range of 5% - 5.25% by the end of next year. This target is higher than the the 4.5% - 4.75% range previously suggested by the Fed, which shows that Fed Chairman Jerome Powell is not softening his hawkish stance.
The broad stock market plummeted at 2:00 on news of the Fed hike but then recovered a bit by the closing bell. It's hard to tell if this initially negative reaction to the Fed news will persist over the next few days, but we are expecting a significant corrective drop in this market, so we might get that. As I mentioned in yesterday's blog, a drop to the 45-day moving average in the DOW and S&P 500 would not be out of the question. Let's stay on the sidelines and wait to see if the correction goes lower.
We can now confirm that gold started a new medium-term cycle with its low of $1617 on November 3. This cycle seems to have a bullish trend, but it is due for a significant sub-cycle correction this week or next which should drop somewhere between the 15-day and 45-day moving averages (that would be $1781 and $1722, respectively, and rising). A good target range would be around $1720 - $1750. We may look to buy there as this cycle is still young and looks bullish and could rally up to $1900.
It's important to note here that gold is probably making a final wave up at the end of a long-term 23-year cycle due to bottom sometime around 2023 - 2025. In other words, the top of this rally (and probably the top of the current medium-term cycle) will be followed by the final wave down to the final bottom of the 23-year cycle in 2023 - 2025. That bottom could go as low as $1000. We may therefore have a very good shorting opportunity near the top of this next rally (as long as that top stays under $2000, and specially $2070 - the top of the current 23-year cycle).
Silver's current medium-term cycle is much older than gold's. It started with the low of $17.59 on September 1 and is into its 15th week. Like gold, silver's general trend looks very bullish right now, but there are also some short-term bearish signals suggesting a corrective drop is imminent - possibly the final corrective drop to the final bottom of the current medium-term cycle (which is due anytime now over the next six weeks). A good target for this correction would be the strong support line around $22. If silver prices drop close to this price over the next several weeks, we may look to buy as the next medium-term cycle could rally as high as $30, and possibly a little more.
For now, we will remain on the sidelines of both gold an silver as we watch for prices to move down to $1720 - $1750 (gold) and $22 (silver).