Gold, silver slip after Fed hike; another rate increase signalled. What it means for bullion - CNBC TV18

The headline is typical noise, focusing on short-term market reactions that miss the bigger picture. Gold and silver "slipping" after a Fed hike is precisely what the paper markets are designed to do in the immediate aftermath, creating an illusion of weakness. The real story here is not that the Fed hiked rates, but that they continue to chase a runaway inflation problem they created. These dips, especially in the context of continued monetary debasement, are buying opportunities for those focused on protecting their wealth, not selling signals.

We saw gold spot briefly dip, perhaps a modest 0.5% to 1%, with silver following suit, after the Fed announced its latest rate increase and signaled more to come. This is the predictable knee-jerk from the algorithm-driven paper market reacting to higher nominal rates and a strengthening dollar index, which often correlates inversely with precious metals in the short term. But the crucial element everyone else overlooks is the real rate of return. With reported inflation stubbornly above the Fed's target, and likely much higher in reality, even these "higher" nominal rates still translate to negative or barely positive real yields. Your purchasing power continues to be eroded, making physical metal indispensable.

Let's put this into context. The last significant single-day dip of this nature that felt like a shakeout was back in March 2020, at the onset of the pandemic panic, before gold decisively broke out to new highs. More broadly, looking at historical Fed hiking cycles, while gold might see initial headwinds, it often performs strongly throughout the cycle, particularly when the Fed is hiking into persistent inflation, as they are now. Think of the late 1970s: the Fed was hiking aggressively, yet gold screamed higher because inflation was out of control. This isn't a new playbook. The physical market absorbs these dips, with demand for coins and bars typically firming up as stackers recognize the value. COMEX paper shorters might celebrate a temporary victory, but the fundamental pressure on physical supply remains.

The Fed is still behind the curve, even with these hikes. They are attempting to rein in inflation without crashing the economy, a nearly impossible task. Their signaling of another rate increase simply confirms their reactive stance to an ongoing problem. This isn't a proactive measure to prevent inflation; it's a desperate attempt to catch up. Meanwhile, central banks globally continue to add gold to their reserves, understanding its role as a hedge against currency instability. Don't confuse paper market gyrations with the enduring value of physical metal.

So, while the headline reads "slip," stackers see consolidation or a modest discount. Your stack protects you from the very inflation the Fed is now struggling to contain. Keep a close eye on the next set of CPI data and the Fed's rhetoric, but more importantly, watch what happens to the premiums on physical gold and silver as smart money steps in.