Gold and Silver End Losing Streak Following Rate Hikes, Employment News

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Interest rate speculation had a significant impact on investor sentiment heading into this week, as some anticipated a Fed pivot away from tighter policy and a pause in the current rate hike cycle. Naturally, the focus was on Wednesday’s scheduled FOMC address, along with employment data set for release on Wednesday and Friday. 

Gold and silver saw little price movement on Monday, with gold edging down from $1,642 to a closing price of $1,638. This solidified a monthly loss for gold of 1.6% and would mark its seventh consecutive month of losses. For the second straight month, gold and silver prices saw a slight divergence as silver ended October 1.7% higher, near the $19.42 level. 

Meanwhile stocks in the U.S. were slightly lower on Monday. However, all three major indices managed to end October higher, ending two-month losing streaks. The Dow Jones Industrial Average was by far the biggest winner, with a 7.9% monthly gain. 

By Tuesday morning gold would find itself near one-week lows around $1,637 as investors awaited Wednesday’s FOMC address. Some expected the Fed to temper its rate-hike posture, which allowed for a pull-back in the dollar index and Treasury yields. This paved the way for modest gold and silver gains on Tuesday, as the pair ended trading near $1,651 and $19.65. 

While some were betting the Fed may indeed ease its stance on interest rates, popular sentiment held that the central bank would institute another rate hike of 75 basis-points, which is exactly what occurred. 

In his address, Powell squashed hopes of a rate-hike pause by stating that Fed officials have “no sense that inflation is coming down.” The Fed Chair also stated that data suggests interest rates may have to be pushed higher than expected. Powell gave no specific indication as to what December rate hikes could look like. 

Stocks and precious metals both tumbled following Powell’s announcement of a fourth straight rate hike, while the dollar index firmed. Wall Street sentiment was dampened following the FOMC address, which meant daily losses for all three major averages. 

The Nasdaq Composite and S&P 500 fell by the most at 3.4% and 2.6%, respectively. Meanwhile, gold ended the day 0.8% lower at $1,636, while silver fell by 1.5%, ending the day at $19.35 an ounce. 

News that a Fed pivot should not be expected in the near future drove stocks down for their fourth straight session on Thursday, while yields for the two-year Treasury note touched thirteen-year highs. The dollar also rose against other major currencies on Thursday, which helped push gold back down to one-month lows near the $1,616 mark.

 Investors were greeted with better-than-expected employment data on Friday from Non-farm payroll data, that showed the U.S. economy adding 261,000 new jobs in October, when 205,000 was forecasted. While employers hired more than expected throughout October, there was a rise in the unemployment rate. For some, this meant that the Fed was more likely to tempter its aggressive rate hike plans. 

This, and a pause in the dollar rally allowed gold to surge by 1.7%, to its weekly high of $1,673. This would mean a 1.8% weekly gain for gold, and an end to its three-week losing streak. As this is written, silver is hovering near $20.55 an ounce, which is 7.5% higher for the week.


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