The conclusion of this week's Federal Reserve meeting was watched with special interest as it was the first for new Fed Chairman Jerome Powell. Investors and financial analysts were all paying careful attention to Mr. Powell's post-meeting statements to ascertain his attitude toward current domestic and global economic conditions. Many analysts have characterized him as generally dovish and accommodating; however, he is thought to be a bit more hawkish than former Chairwoman Janet Yellen. As anticipated, the Fed raised interest rates on schedule by a quarter percentage point, but Mr. Powell stated that the Fed would stick to its original plan of only three hikes this year and avoided sending any overtly hawkish messages. Financial markets did respond to the Fed meeting today, but we will have to wait a few more days to see if this response is just a "flash in the pan" of an already highly volatile market.
The broad stock market rallied a bit into the 2pm Fed statement but then fell immediately after and closed the day with a slight loss. Perhaps Wall Street didn't like the fact that central bankers did push up their expected interest hike rate path for 2019 and 2020. If so, this just adds more downward pressure to a market that seems to be headed towards a low into next week's reversal zone. We are still hoping for a good spot to buy as long as the correction doesn't go to deep. Still on the sidelines of this market.
In contrast to the broad stock market's nervousness over a faster rate path in 2019-2020, the U.S. Dollar Index seemed to find the Fed's "stay the course" (at least for 2018) rhetoric too dovish. The dollar fell sharply after 2 pm and closed the day below 90. This in turn greatly boosted gold and silver prices and lifted our long position in gold significantly. Yesterday silver broke below its March 1st low while gold did not (bullish divergence) so this may be a turning point for these metals and the start of a significant rally. We will have to wait and see if this reaction to the Fed will last more than a day or two. Holding our long position in gold but still out of silver.
Along with gold, crude oil prices also soared today as crude broke and closed well above its Feb. 26 high of $64. This is a bullish sign, but crude still faces resistance at its Jan. high of $66 (May contract chart). If the broad stock market finds a bottom next week and starts to rally again, we could see crude overcome that resistance soon. On the sidelines of crude oil for now.