Gold Soars After Fed Hikes Interest Rates To A 16-year High

Fed Hikes Interest Rates for Tenth Time

Investors turned to the safety of gold and silver after the Federal Reserve hiked interest rates for the tenth time in its battle against America’s public enemy number one: inflation.

On Wednesday, the Fed increased its benchmark interest rate by 0.25% to 5.0-5.25%, a 10-year high. Gold and silver both traded significantly higher after the Fed meeting.

Are Rate Hikes Over?

In a hint of what lies ahead, central bankers removed a key phrase from their last policy statement, which said some additional policy increases might be appropriate. Wall Street experts reading between the lines say that means the Fed might be done hiking interest rates for now.

Another Bank Failure

This week’s interest rate hike from the Fed comes on the heels of the second largest U.S. bank failure in history. Last week, federal regulators seized failing San Francisco-based First Republic Bank and sold it to banking giant JP Morgan. We have now seen three of the four largest ever U.S. bank failures unfold in the last two months.

The banking collapse of 2023 is now officially bigger than the banking collapse of 2008. 

Yes, you read that correctly.

Collectively, the three big banks that have collapsed in 2023 had more assets than all 25 banks that collapsed in 2008 did.

Gold Outlook Positive

Sentiment towards precious metals remains positive, as investors seek an asset that will not only help grow their wealth, but also protect and preserve it. Citigroup recently forecast additional near-term gains for gold, with a price forecast of $2,300. That would stand as a new all-time high for the yellow metal.

Inflation Still Too High

Despite the Fed’s ten interest rate hikes since March 2022, inflation remains stubbornly high and well above the central bank’s 2% target inflation rate. The most recent data shows that consumer inflation is still too hot at 5% in March. Inflation continues to destroy the wealth of Americans every day.

The Bottom Line

With a potential recession on the horizon, still-high inflation, uncertainty over the stability of the banking sector, and a debt ceiling crisis looming, it’s no surprise that gold and silver are gaining ground. The uptrend for precious metals is strong and there is still opportunity to lock in future price gains if you increase your allocation to gold now.

Historically, gold climbs in the months ahead of and after a recession. With an economic slowdown already in the works, it’s time to consider if you own enough gold.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world and the latest tangible assets news delivered to your inbox weekly.