Stocks, precious metals and cryptocurrencies have all broken in 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 benchmark interest rates at the next FOMC meeting. Analysts believe that current market trajectories will depend on the outcome of the next Fed meeting.
Markets remain on edge ahead of Fed meeting despite gains in stocks, cryptocurrencies and precious metals in 2023
On Saturday, January 21, 2023, at 14:45 Eastern Time, the global cryptocurrency market cap was up 5.87% from the previous day and hovered around $1.06 trillion in value. The leading crypto asset, bitcoin (BTC), had climbed 11.63% higher against the US dollar in the last seven days. The second leading digital currency in terms of market capitalization, ethereum (ETH), had risen 8.33% that week against the dollar. The rise in value of these two cryptoassets has also increased the US dollar value of thousands of digital currencies below BTC and ETH.
The day before, Friday 20 January, the stock markets closed the day in the green. The top four 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, rising 2.66%, the S&P 500 rose 1.89%, the Russell 2000 Index ( RUT ) jumped 1.69% higher, and the Dow gained 1% on Friday. US stocks have posted their second straight week of gains so far this year. The small company index RUT has risen 7.1% this year, with small company shares leading the stock race in 2023.
Precious metals have also done well with a troy ounce of gold trading at $1,927.30 per unit and silver at $24.01 per ounce. Like cryptocurrencies and stocks, precious metals have rallied in 2023, erasing the losses that took place in December 2022. Gold enthusiast Peter Schiff believes the price of the precious yellow metal will grow higher this year. “Gold now trades above $1,934, highest price since April 2022,” Schiff tweeted January 19. “However, gold stocks still haven’t even taken out last week’s highs. In fact, gold stocks would need to rise 30% from here just to get back to where they traded in April 2022. This selloff may not last long, he added.
Speaking to Kitco News, OANDA senior market analyst Edward Moya said gold prices will remain indifferent until the Federal Reserve’s meeting in February 2023. “It’s going to be choppy,” Moya said. “I am neutral on gold until the Fed’s meeting on February 1. Major resistance is at $2000. But I would be surprised if we move above $1950. “We are likely to 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 an aggressive tightening plan will continue, while others expect the Fed to ease and swing with a “soft landing.”
The Biden administration and White House economist Heather Boushey told Reuters that current leaders do not expect a recession. “The steps have been taken and it looks like we are in a very good position to have the soft landing that everyone is talking about,” Boushey insisted. On Friday, Federal Reserve Governor Christopher Waller told reporters at a Council on Foreign Relations conference in New York that he favors a smaller rate hike than the previous seven. So far, the Fed has implemented seven rate hikes in 2022, two of which were half-point increases and five were three-quarter point increases. Waller can envision a quarter-point increase at the next FOMC meeting next month.
“I currently favor a 25 basis point hike at the FOMC’s next meeting at the end of this month,” Waller told reporters. “Beyond that, we still have a significant way to go toward our 2 percent inflation target, and I expect to support continued monetary policy tightening,” the Fed chief added.
It is quite likely that all three major markets (precious metals, cryptocurrencies and stocks) will react in one way or another after the Fed’s next decision. Many believe the decision on the next FOMC meeting will be entirely dependent on inflation gauges. US President Joe Biden has tweeted about the US economy over the weekend as he believes the country is on the road to recovery. “Annual inflation has fallen for six months in a row, and gas is down $1.70 from its peak,” Biden tweeted Saturday morning at 10:25 Eastern Time. “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 think it will affect the current market paths of stocks, precious metals and cryptocurrencies? Let us know what you think about this topic in the comments section below.
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