What’s Next For Gold Prices As Fed Faces Its Biggest Rate Decision Since 2008?

Phil Carr
Published: Mar 22, 2023, 12:40 UTC

It is said that those who do not learn from history are bound to repeat it. Unfortunately, it would seem that this adage is all too applicable to today’s Federal Reserve.

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Throughout history, every time the Federal Reserve has engaged in an interest rate hiking cycle, they have kept going “until something eventually breaks”.

And that’s the exact situation the Fed finds themselves in, once again.

A Banking Crisis Puts the Fed in a Difficult Position

After 450 basis points of tightening and more specifically on the one-year anniversary of their most aggressive interest rate hiking campaign since the 1980s – something has finally broken!

The collapse of Silicon Valley Bank and three other prominent lenders over the past 11 days – marks the second-biggest banking failure in U.S history – ultimately putting the Fed in a very difficult position as it prepares to announce their most consequential interest rate decision since the 2008 Global Financial Crisis.

At the start of the month, Fed Chairman Jerome Powell floated the idea of speeding up the pace of increases with a rapid return back to super-sized rate hikes. But in a sign of just how much the recent global banking turmoil has altered the Fed’s calculus, policymakers are now debating whether to raise rates – pause – or even cut them.

The Federal Reserve was already under fire for being too slow to tighten rates and bring inflation under control by dismissing it as “transitory”. Now, a banking crisis hands the U.S Central bank their most significant challenge to date – how to steer the banking sector out of the predicament and prevent risk of contagion spreading across the broader financial system – and the global economy.

The Fed’s Dilemma: To Hike or Not To Hike?

That’s the biggest question facing the Fed right now as it edges closer to what could quite possibly be the most pivotal decision ever in the history of the Federal Reserve.

There is no deny that the Fed is caught between a rock and a hard place. If the Fed continues hiking interest rates, then they inevitably risk breaking more things – if not in the real economy, then in the financial system.

If the Fed pauses their rate hiking campaign – then they will lose any credibility they had left. However if the Fed cuts rates – that will look like a panic move, which could spark a bigger crisis.

Regardless of the outcome, the Fed’s next move is guaranteed to move the markets significantly, bringing with it massive opportunities to generate huge profits fast!

Gold Price Forecast for March 22, 2023

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

About the Author

Phil Carrcontributor

Phil Carr is co-founder and the Head of Trading at The Gold & Silver Club, an international Commodities Trading, Research and Data-Intelligence firm.

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