Dovish Fed, Dollar falls, Gold climbs

Long-term Treasury yields plunged in response to a dovish Fed meeting which kept rates on hold, with a target range of 5.25% – 5.00%. Ten-year Treasury yields are now testing our target at 4.0%.

10-Year Treasury Yield

Declining inflation and signs of labor market easing moved the FOMC to discard the additional rate hike and increase projected rate cuts to 75 basis points next year. Their dot plot now shows 2024 ending with a target range of 4.5% – 4.75%.

10-Year Treasury Yield

Unemployment is forecast to rise to 4.1%, from 3.8% at the end of 2023, but still close to full employment. PCE inflation is projected to slow from 2.8% at the end of ’23 to 2.4% by the end of ’24, with real GDP growth slowing from 2.6% in 2023 to 1.4% next year.

QT continues unchanged at the rate of $95 billion per month: $60 billion Treasuries and $35 billion MBS.

The S&P 500 closed at 4707, headed for a test of its previous high at 4800. Breakout would signal a primary advance, with a target of 5500.

S&P 500

The equal-weighted S&P 500 ($IQX) also rallied strongly, testing medium-term resistance at 6300, compared to the early 2022 high of 6665.

S&P 500 Equal-Weighted Index

Large caps show plenty of buyer interest but the Russell 2000 small caps ETF lags far behind. Normally small caps lead in the first stage of a bull market, so this warns that investors are more risk-averse than in a typical bull market.

Russell 2000 Small Caps ETF (IWM)

Gold & the Dollar

The Dollar weakened, as no doubt intended. Breach of support at 102.50 would offer a target of 100.

Dollar Index

Gold jumped to $2031 per troy ounce. Recovery above $2000 signals another test of resistance at the earlier close of $2070. Dollar Index breach of support at 102.50 would be likely to push Gold above $2070, confirming the medium-term target of $2250 per ounce.

Spot Gold


The bull-trend in stocks, bonds and Gold continues. Breakout to new highs on the S&P 500 and Gold are likely. But beware that the bullish outlook is built on an unstable foundation, with commodities warning of a global recession and record-high federal debt-to-GDP limiting Fed options if the Treasury market is threatened by large outflows.