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It’s all about persisting inflation at the end of the day. All markets watch how the Fed tries to fight it as aftershocks of rate decisions are observed in bonds, stock market, foreign exchange, precious metals and even crypto.
Source: TradingView
The graph above visualizes that “fight of the night”. Indeed, we witness some progress of the Fed’s efforts in the falling U.S. inflation (red line) numbers from the peak of 9.1% in the summer down to the latest data of September at 8.2%, which was still above the expected 8.1%.
The 3% increase of the Fed rate (blue line) brought inflation down only by 0.9%. It is way too slow, as the inflation target of 2% is still way too far, hence the Fed could keep their aggressive tightening mode.

Surely, there is a time lag between the Fed action and the inflation reaction. However, the time is ticking away as inflation is like a fire – the earlier it’s extinguished the better.
The real interest rate (black line, down pane) crossed over the August top above the -5.1%. The next resistance is at -3.7% (valley of 2011) and it is highly likely to be hit soon as it is only 1.2% away. The valley of 2017 in -2% is almost 3% away, which means a huge Fed rate hike or a big drop of inflation. We can’t rule it out anyway.

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Indeed, these interest rate projections above could make precious metals life tough. Let’s check the gold futures chart below.
Source: TradingView
The gold futures price has lost ground last month as it has dived below the July growth point of $1,678. It was a double support as the price also breached the black dashed long-term trendline. We can see the textbook price action there – breakdown, retest of broken support and resumption of collapse.
The yield of 10-year U.S. Treasury bonds (red line) skyrocketed to 4%, extending the divergence with the gold price hugely. This amplifies the bearish potential for the gold price massively.
I added the US M2 money supply indicator (green line) to show you that it is flat and it offers a cap for the gold price. It suppresses the bullish potential for the metal as the “printing press” has stopped.
The Volume profile indicator (orange) shows that the price is in the volume gap as there is no support until it drops to $1,500. Beware of it, as it is not as thick as the above resistance area at $1,800 and the next support zone at $1,300.
The RSI is in bearish mode as it didn’t even touch the waterline during the price retest of the broken support.
Last time the majority of readers chose the only bullish option that the price would hold the ground of $1,678. This is that rare case when your main bet did not play out.

The next support of $1,500 was the second choice. In terms of Volume profile indicator, the $1,300 support is larger than the $1,500. However, the $1,300 option has been skipped in favor of really “die-hard” support of $1,000. It means that readers consider $1,500 as a “fly or die” option.

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Intelligent trades!
Aibek BurabayevINO.com Contributor
Disclosure: This contributor has no positions in any stocks mentioned in this article. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.

Since the Federal Reserve started raising interest rates, we have seen a dramatic increase in the US dollar. The main reason is that the dollar is becoming a more attractive investment for investors at home and worldwide.
There are a lot of dynamics at play that investors need to consider when the dollar is rising. Such as, a rising dollar will hurt domestic companies that sell internationally because the exchange rate lowers their profits. However, companies that import raw materials will benefit from a strong dollar.
Due to the strong dollar, some emerging markets will suffer if they borrow in dollars. This happens because it becomes harder for borrowers to pay back their debt as the dollar strengthens. Furthermore, these same countries can get hit with a double whammy if they also import many US goods since those goods will now be more expensive.
Let us look at a few Exchange Traded Funds that you can buy that will help your portfolio weather this strong dollar storm.

I would like to mention the first two ETFs are also rather obvious picks. The Invesco DB US Dollar Index Bullish Fund (UUP) and the WisdomTree Bloomberg US Dollar Bullish Fund (USDU) both are long the US dollar against a basket of other global currencies.
In plain English, these funds increase when the dollar rises and decline when the dollar declines compared to other international currencies. There is no magic here and nothing fancy going on; if you think the dollar is going higher, buy one of these two funds and hold it for a while.
Another set of ETFs you could buy are dividend-paying ones. Something like SPDR Portfolio S&P 500 High Dividend ETF (SPYD), the WisdomTree US High Dividend Fund (DHS), or my favorite, the ProShares S&P 500 Dividend Aristocrats ETF (NOBL).
These will typically do well when the dollar rises for a few reasons, mainly because the stronger dollar will likely hit the earnings of companies with large exports. But, as companies, especially those in the Dividend Aristocrat group, are very reluctant to cut their dividends, the stock prices of these firms usually hold up better than the non-dividend paying stocks.
Another option is to focus on industries that have high US imports. The two top industries with the highest imports are pharmaceuticals and medical equipment. So you could buy Exchange Traded Funds that own pharma and medical equipment companies – Something like the VanEck Pharmaceutical ETF (PPH) or the iShares US Medical Devices ETF (IHI).
Since these ETFs focus on two industries with high levels of imports, the strong dollar will help lower their material costs, which should translate to making companies more profitable.

Another industry you may want to look at is the auto industry. Auto manufacturers import a lot of the parts that go into building a vehicle. Plus, a sizable number of automobiles sold in the US are actually built in other countries.
The auto industry has many moving parts and many different factors that could cause stocks operating in this industry to decline. Finally, the auto industry doesn’t have a great Exchange Traded Fund.
However, if you still want to look into it, check out the First Trust NASDAQ Global Auto Index Fund (CARZ) or the Simplify Volt RoboCar Disruption and Tech ETF (VCAR).
As things currently sit in the US economy, it would appear that the Federal Reserve will continue to increase the federal funds rate in the short term. That means the likelihood that the US dollar will continue to increase is high.
So, while you may feel you missed the big move on the dollar, that may be true that the most significant part of the move has occurred, but that doesn’t mean that you still can’t get a little more juice out of this lemon.

Given its past history, both over the long term and especially more recently, it’s inevitable, if not a given, that the Federal Reserve will screw up. This time should be no different. When exactly this will manifest itself is hard to say, but it may be soon—possibly before the end of this year or in early 2023.
The Fed, as we know well, grossly inflated prices and asset values post-pandemic by sticking too long to an overly accommodative monetary policy, holding its benchmark federal funds level at zero percent as recently as March and continuing to buy Treasury bonds, long after inflation was shown to be a lot more “transitory” than the Fed thought.
Now we are all paying the price for the Fed’s belated realization that it was wrong about inflation, as it has raised interest rates five times in the past six months, to 3.00%-to-3.25%, including 75 basis points at each of its past three meetings, and shows few signs of intending to sit and wait and see how those rate hikes will affect the economy.
In the process, the Fed has basically chucked the second piece of its dual mandate, namely maximizing employment, in order to slay the inflation beast.

The American consumer and investor are thus no better than pawns in the Fed’s game of trying to fix a situation it largely created by itself, yet there is no reason to believe that its current policies are any better or smarter than its previous prescriptions, which involved flooding the financial markets with buckets of cheap money it didn’t need.
Now it’s trying to undo all that in a few short months, all while trying not to steer the economy into the ditch, although perfectly happy to throw people out of work and gut their retirement portfolios.
(Question: If the Fed’s actions will force some people to keep working or rejoin the labor force—and there are still plenty of job openings—doesn’t that work against its plan to reduce employment?)
At some point — sooner rather than later, we hope, but no doubt later than everyone else — the Fed will suddenly come to the conclusion that it’s gone too far with tightening and will start to take its foot off the monetary brakes. It may not start to lower interest rates, necessarily, but at least take a breather and see what effect its recent new-found hawkishness has had on inflation and economic growth.
Far from being the “data dependent” experts of the recent past, the Fed has suddenly become slaves to the notion that inflation is deeply embedded in the economy and that it won’t pause until it believes the job is done, regardless of what the forward data portend. But what if the job already is done, or at least largely so? Shouldn’t we at least pause and see if it is?
What’s particularly startling about the Fed’s arrogance — there is no other word to describe it — is that it’s based on so much information and so many (book) smart people interpreting that data, yet time after time they manage to get it wrong.
One of the most astonishing things I’ve noticed about Fed policy since I’ve been writing this column is how often they’ve been caught flat-footed by the release of a government statistic — CPI or the unemployment rate, say — that you feel almost certain that it should have known about beforehand, yet it seemed more surprised about it than anyone.
So asking the Fed to forecast something — long-term inflation in this case — is asking it to do something that not only no one can do with any accuracy, but that the Fed is itself seems particularly incapable of doing. Yet here we all are at its mercy.
I do not pretend to know what inflation will be at the end of next year. But I am fairly confident that the Fed’s forecast will be wrong, as will its prescription about what to do about it.

Stock prices keep dropping and bond yields keep rising on the assumption that the Fed will continue its full-speed-ahead approach to monetary tightening. So if my premise is correct, that the Fed may be closer to ending its rate-rising regimen sooner than it now claims it is, the market may be set to reverse course and move higher.
I anticipate more bumps in the road ahead. But I’m starting to think that the stock and bond markets are going to end the year higher than where they are now, meaning the fourth quarter may turn out positive for investors, as the Fed finally comes to the conclusion that it was wrong and everyone else was right.
Treasury notes maturing in less than five years are yielding well above 4%. Should that handle get to 5, that could be the signal to start shopping.
George YacikINO.com Contributor
Disclosure: This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.