Episode 15 of The SilverTrade Insider: The MATH Behind $16,000 GOLD! 

Authored by GoldFix

Good afternoon. This is still a brief market recap, but I really want to focus on the Fed decision today.

The decision to hike, not hike, or even cut is a really big one. It may not necessarily be big for the markets. Actually, it will be big for the markets. But it is also a big decision because Warsh has been talking hawkish since day one, and even before day one.

Now he is in a situation where I think the sun, the moon, and the stars all align with the Fed hiking now.

It may be a mistake to hike. It may crack the credit markets and force them to ease afterward, which I am all for as a purveyor of gold and silver. But I think he has to back up his reputation.

Hike now. Scare everyone. Punch the first guy you see in prison, preferably the biggest guy. Then he can go back to doing what central bankers do best, which is slowly inflate, or slowly debase, the currency over time.

Citadel’s head of macro put out a report today. ZeroHedge picked up on a version of it. Their full coverage is here.

Essentially, the report argues that markets are underestimating, and maybe grossly underestimating, the Federal Reserve’s increasingly hawkish stance under Warsh. Citadel expects the Fed to raise interest rates in July rather than waiting until September.

The report says a surprise hike would reinforce the Fed’s inflation-fighting credibility, strengthen its policy signaling, and help prevent inflation expectations from becoming entrenched, despite the recent mixed economic data.

With regard to hiking now rather than in September, they do not say this directly in the report, but I will say it for them. Hiking in September, right before the midterm election, could be seen as political. If Warsh can avoid looking political, get the hike over with now, and strengthen his credibility right out of the gate, I think he would want to do that.

There are really three takeaways from the report for anyone who does not have the time, luxury, or patience to read the entire thing.

First, Citadel expects a hike in July. They believe the Fed is more likely to raise rates now than the market expects.

Second, if the Fed does hike, it will probably be for credibility purposes. It would be a surprise move because the market still does not think there is a better-than-even chance of a hike.

Third, a hike would reinforce the Fed’s commitment to fighting inflation. Warsh has said inflation is his priority. If it is his priority, then at some point he has to act like it.

If you plug the current numbers into the Taylor Rule, or one of the similar policy rules, everything looks very hawkish. Everything points toward the Fed having to tighten, even if doing so risks cracking credit or hurting AI-related assets.

That is pretty much the argument.

You have to assume that if the Fed hikes, it will be bearish for risk assets, including gold and silver, at least initially. If the Fed does not hike, frankly, I think the sky is the limit.

The market wants to go higher. Gold especially wants to go higher. One of the main reasons it is not going higher right now is because this Fed decision is hanging over the market today.

So, fingers crossed.

The point is that if the Fed hikes now, it probably will not have to hike again for the rest of the year. It may even find itself in a position where it has to cut later.

Whatever dip comes after a hike could therefore be the final dip. It could be a big one. Gold could fall $100. But it could also mark the end of the correction.

If that is the case, then we are in a good position.

We shall see.

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