Gold Reaches a New All-Time High as Rate Cut Bets Persist
This week’s calendar of economic events was chalked full of events that would influence investor sentiment in Fed speaking engagements and employment data. Ultimately, monetary policy bets would emerge as primary drivers of precious metals throughout this week.
Gold started the week at $2,084 an ounce, while silver began the trading week near $23.14. Gold quickly jumped to a 3-week high of $2,117 on Monday as the odds of a June rate cut reached 66%, according to the CME FedWatch Tool. At the same time, heightened geopolitical tensions in the Middle East lent additional support to bullion. Stocks opened the week slightly lower, as investors braced for a full week in terms of economic events.
On Tuesday, investors digested downbeat economic data which reflected slowdowns in the U.S. services and manufacturing sectors. Following the news, equities extended declines from the previous session. Meanwhile, gold and silver saw little change with respective closing prices of $2,125 and $23.70.
On Wednesday, Federal Reserve Chair Jerome Powell gave his first of two testimonies before the United States Congress, where he did not commit to a firm timetable for interest rate cuts. However, the Fed Chair expressed confidence that the Fed funds rate is likely at a peak of 5.25%-5.5%. Powell also indicated that the central bank would indeed cut rates sometime in 2024.
While Powell’s’ testimony lacked the firm timeline that many were looking for, it was enough for markets to rally around, as U.S. stocks rebounded from the prior session’s steep sell-off. The prospect of monetary policy easing further supported precious metals, as gold would touch a fresh all-time high of $2,157, while silver managed to breach $24 for the first time since January 2nd.
Powell was back in the spotlight again on Thursday, this time in front of the Senate Banking Committee. In his testimony, the Fed Chair stated that interest rate cuts, “can and will begin" this year. Powell also noted that inflation had “eased notably.” Weekly jobless claims data was released on the same day, which showed that the number of Americans who applied for unemployment benefits last week was unchanged at 217,000, which was in line with forecasts.
The dovish tone struck by Powell and U.S. employment news preceded another rally on Wall Street, as the S&P 500 closed at a record high of 5,157.36. On the same day, Treasury yields continued to decline, while gold and silver firmed near $2,157 and $24.30, respectively.
This morning, data from the Bureau of Labor Statistics revealed that the labor market added 275,000 nonfarm payroll jobs in February, which was significantly higher than forecasts calling for 198,000. The positive employment news bolstered rate cute odds, which meant gold would touch a new all-time high of $2,198. As this is written, gold is near $2,175 an ounce, which would be a 4.4% weekly gain and the yellow metal’s best week in nearly 5 months. Meanwhile, silver is eyeing a 5.1% weekly gain at $24.32 an ounce.
Stocks pulled back following this morning’s employment news and are headed for a mixed week. Currently, the S&P 500 is 0.37% higher for the week, while the Dow Jones Industrial Average and Nasdaq Composite are looking at 0.61% and 0.40% respective weekly downturns.