For months, precious metals have encountered consistent downward pressure from higher interest rates, dollar strength, and higher Treasury yields. This trend has eased somewhat in recent weeks, as some have anticipated a slowdown in Fed rate hikes. Naturally, gold bugs and participants in the broader market have continually monitored key economic metrics such as inflation and employment data, along Fed speak.
All of these elements were present this week, with economic news or scheduled speaking engagements from Fed officials occurring throughout the week. Key among them being Wednesday’s speech from Fed Chair Jerome Powell, along with inflation and employment data set for release later in the week.
Gold and silver saw little price movement on Monday and Tuesday, as the pair hovered around $1,750 and $21.20, respectively. Growing demonstrations in China dented investor sentiment on Monday, as Chinese citizens protested Beijing’s authoritarian crackdown on its citizens via its zero Covid policy.
Fears of continued shutdowns in the region, drove a selloff which meant that major averages such as the Dow Jones Industrial Average and S&P 500 ended the day about 1.5% lower. Stocks in the U.S were slightly lower on Tuesday as well, as investors braced Wednesday’s address from Jerome Powell.
In remarks delivered at the Brookings Institution, Powell made it clear that more rate hikes were to come, but that the pace of rate increases may indeed slow as early as the December meeting. In his speech, Powell set the stage for a 50-basis point rate hike in December. In reality, this isn’t a significant departure from the previous rate hikes of 75-basis points. However, for some, this signaled a pivot.
Stocks jumped immediately following the Fed Chair’s address, as many investors interpreted Powell’s remarks as dovish. At the same time, Treasury yields and the dollar slumped, which was supportive of precious metals. By the end of Wednesday’s trading, gold was 1.6% higher at $1,781 an ounce. Meanwhile, silver closed near the $22.35 mark, which was 5.3% higher for the day.
A perceived pivot in Fed policy along with a waning dollar index meant gold would have its best month in nearly two years, as the yellow metal ended November 7.9% higher. With a similar monthly trajectory to gold, silver was able to solidly a 14% monthly gain.
More inflation news came on Thursday, as the core personal consumption expenditures price index rose 0.2% in October, which was slightly below estimates of 0.4%. This index excludes food and energy. On the same day, news broke that U.S. weekly jobless claims came in at 225,000 against the forecast of 235,000.
Despite the positive news stocks were mixed on Thursday, while precious metals maintained their bullish momentum. On the same day, the dollar index inched about 0.5% lower, while gold touched a two-week peak near $1,797.
Nonfarm payroll data was released earlier this morning, which showed a higher number of 263,000 new October jobs when 200,000 was expected. Stocks slid following the news, as some investors believe positive employment data will lead to more hawkish Fed policy. As this is written, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite are still on track for modest weekly gains.
Currently, gold is near $1,795, which is 2.6% higher for the week while silver is eyeing a 6.9% weekly gain at $23.06 an ounce. Currently, the pair is enjoying support from a weaker dollar and lower yields. It seems likely the pair will be reactive to Fed speak and dollar strength leading up to the next Fed meeting, which is scheduled for December 13th.
