Stocks, precious metals and cryptocurrencies have been on a tear over the last three weeks of 2023, and all eyes are now on the next Federal Open Market Committee (FOMC) meeting, which is 11 days away. On Friday, Federal Reserve Governor Christopher Waller said he favors a quarter-point increase in the benchmark rate at the next FOMC meeting. Analysts believe that the current trajectory of the market will depend on the outcome of the next Fed meeting.
Markets remain on edge ahead of Fed meeting in 2023 despite gains in stocks, cryptocurrencies and precious metals
As of Saturday, January 21, 2023 at 2:45 PM ET, the global cryptocurrency market capitalization was up 5.87% from the previous day to around $1.06 trillion in value. Leading crypto asset, Bitcoin (BTC), has traded 11.63% higher against the US dollar in the past seven days. The other leading digital currency by market cap, ethereum (ETH), rose 8.33% against the dollar that week. The increase in the value of these two crypto assets also increased the US dollar value of thousands of digital currencies below BTC and ETH.
The day before, on Friday, January 20, the stock markets closed the day in the green. The four largest benchmark stocks (S&P 500, Dow Jones, Nasdaq and Russell 2000) ended the day between 1% and 2.66% higher against the US dollar. The Nasdaq Composite was the highest, up 2.66%, the S&P 500 rose 1.89%, the Russell 2000 index ( RUT ) jumped 1.69% higher and the Dow rose 1% on Friday. US stocks posted a second straight week of gains this year. The RUT small-cap index grew by 7.1 percent this year, and small-cap stocks are leading the race for stocks in 2023.
Precious metals also fared well with three ounces of gold trading at $1,927.30 per unit and silver at $24.01 per ounce. Like cryptocurrencies and stocks, precious metals rallied in 2023, erasing the losses that occurred in December 2022. Gold enthusiast Peter Schiff believes the price of the precious yellow metal will rise this year. “Gold Now Trading Above $1,934, Highest Price Since April 2022,” Schiff tweeted January 19. “Gold shares, however, have not yet reached last week’s high.” In fact, gold stocks need to rise 30% from here just to get back to where they were trading in April 2022. This selloff may not last long,” he added.
Speaking to Kitco News, OANDA senior market analyst Edward Moya detailed that gold prices will remain flat until the Federal Reserve meeting in February 2023. “It’s going to be tense,” Moya said. “I am neutral on gold until the Fed meeting on February 1st.” The biggest resistance is at $2,000. But I would be surprised if we move above $1,950. “We will probably consolidate here until the Fed meeting,” the market analyst added. Market analysts and macroeconomic experts have no idea what the Fed will do at the FOMC meeting. Some believe aggressive schedule tightening will continue, while others expect the Fed to ease back and turn to a “soft landing.”
The Biden administration and White House economist Heather Bush told Reuters that current leaders do not expect a recession. “Steps have been taken and it looks like we are in a very good position to have that soft landing that everyone is talking about,” Bushey insisted. Federal Reserve Governor Christopher Waller told reporters at the Council on Foreign Relations conference in New York on Friday that he favors a smaller increase in interest rates than the previous seven. So far, the Fed has implemented seven rate hikes in 2022, two of which were half-point increases and five of which were three-quarter point increases. Waller can envision a quarter-point hike at the next FOMC meeting next month.
“I currently support a 25 basis point hike at the next FOMC meeting later this month,” Waller told reporters. “In addition, we still have a significant way to go toward our 2 percent inflation target, and I expect to support further tightening of monetary policy,” the Fed governor added.
It is very likely that all three major markets (precious metals, cryptocurrencies and stocks) will react in one way or another after the next Fed decision. Many believe that the decision on the next FOMC meeting will depend entirely on the inflation gauge. US President Joe Biden tweeted about the US economy over the weekend as he believes the country is on the road to recovery. “Annual inflation has declined for six months in a row, and gas is down $1.70 from its peak,” Biden tweeted on Saturday morning at 10:25 am ET. “We are successfully moving from economic recovery to stable growth,” Biden added.
What do you think the outcome of the next FOMC meeting will be and how do you believe it will affect the current trajectories of the stock, precious metal and cryptocurrency markets? Let us know what you think about this topic in the comments section below.
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