Gold and silver have both seen their prices fall this week on news that the Federal Reserve have paused their rate hikes for now, but warned further hikes will likely still be needed.

Yesterday’s rate decision was highly anticipated, with markets unsure whether the Fed would continue to hike for the 11th month in a row, or finally pause. US inflation has been coming down in recent months but is still double the Fed’s target of 2%, leaving uncertainty over the direction they would take.

The FOMC statement reads “Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy”. Chairman Jerome Powell made it clear however that further hikes are still expected. “Looking ahead, nearly all committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2% over time.”

150623 USD Chart

Despite the pause in hiking, the hawkish outlook still saw the dollar rally slightly, pushing both gold and silver down. Gold is down 1% in USD in the past 24 hours, trading at $1,930 per ounce currently, a near 3-month low for the metal. Silver fared worse, down 2.41% to $23.30 per ounce, roughly a two-week low.

Expectations of further hikes at future meetings could see the dollar push higher in the weeks ahead, but if inflation and other US economic figures come in weak in the meantime, the Fed could pivot, choosing to pause longer-term, or even begin to cut rates should inflation fall faster or the US economy head for recession. The next FOMC meeting is at the end of July, leaving six more weeks of data for the Fed to make further decisions.

If this is as low as the dip in gold and silver goes remains to be seen, the Fed’s meeting in July will likely be the next key mover. When the pivot to rate cuts does happen however, gold and silver should see further gains, and in the case of gold that could easily propel it to new all-time highs.