US Interest Rate Decision Looms, Inflation Concerns Persist

14 June, 2023

As at 10am, AEST

Gold Spot Price $AU2876

Silver Spot Price $AU35.14

Platinum Spot Price $AU1465

The anticipation builds as the market eagerly awaits the Federal Reserve's upcoming interest rate decision. With 11 consecutive rate hikes since last year, there is a sense of curiosity about whether the Fed will proceed with another increase or opt for a temporary pause.

Recent CPI data, indicating stubbornly persistent inflation, has left most analysts sceptical of a halt in rate hikes. May's consumer price index revealed a modest 0.1% increase, bringing the year-on-year figure to 4.0%. Excluding food and energy, core CPI rose by a more substantial 0.4% in May, resulting in a year-on-year increase of 5.3%.

While inflation appears to have peaked and shows gradual signs of stabilisation, central banks like the Fed remain steadfast in their commitment to aggressive rate hikes, asserting that short-term pain will yield long-term protection.

However, it has become increasingly clear that taming inflation is a gradual process that cannot be achieved overnight.

With higher interest rates expected to persist, attention turns to precious metals and their role in combating inflation. Gold and silver traditionally benefit from inflationary periods in two ways: firstly, as the cost of doing business rises, the price of commodities, including precious metals, tends to increase.

Secondly, during times of uncertainty and lower returns on traditional investments, investors often seek refuge in gold and silver. The historical correlation between precious metals and inflationary periods is well documented, leaving gold and silver investors pondering the opportune moment to sell or acquire more.

Over the past four weeks, gold and silver have traded within their projected ranges. Both metals appear to be awaiting further economic developments before embarking on their next price trajectory.

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