How to play commodities ahead of the Fed

Is the Fed about to give commodities a much-needed boost?

Gold tempered recent gains ahead of the Federal Reserve statement Wednesday. But if the central bank sounds dovish in its release at 2 p.m. ET, gold and other metals could be ready to surge.

In December, the Fed raised the federal funds rate for the first time in almost a decade. However, Phillip Streible of RJO Futures said he doesn't expect another rate hike for the rest of 2016. The absence of further rate increases should lead to a weaker dollar and higher gold prices.

"The metals markets: gold, silver, platinum, palladium, copper, they're all set to benefit from that type of move," Streible said Tuesday on CNBC's "Trading Nation."

Gold has gained more than 5 percent this year as the broader stock market has plummeted. But Neil Azous of Rareview Macro noted on Wednesday that while gold could see a move higher on a dovish Fed statement, a better liquid play would be to short FXY, the ETF tracking the Japanese yen.

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More broadly, Boris Schlossberg of BK Asset Management said that if the Fed looks less inclined to raise rates, "all the risk trades will do well. Equities will pop and I think oil will run as well."

There appears little chance of the central bank announcing a rate increase Wednesday, but traders are certain to keep a close eye on the Fed's commentary about what the path of hikes will look like in 2016. While some are hoping for it to allude to recent market volatility, and give that as a potential reason to delay rate rises in the future, Schlossberg says the Fed may disappoint on that front.

"They need to preserve the aura of invincibility in their decision-making process." he said in a Tuesday "Trading Nation" segment. "They're going to try to stay as neutral as possible, and that actually could be a disappointment to the market that's looking for a more dovish message."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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