Gold Reaches a New All-Time High, Stocks Rally Amid Rate Cut Optimism
Last week, gold notched a 0.9% weekly downturn as profit taking pressured bullion prices to the downside. U.S. economic data remained the focus of investors throughout this week, as inflation and employment data have heavily influenced monetary policy and the odds of interest rate cuts.
Following last week’s volatility, U.S. stocks dipped during quiet trading on Monday, as investors looked forward to inflation and employment data due out on Wednesday and Thursday, respectively. On Monday, markets were pricing in a 49% chance of a more aggressive, 0.50% rate cut in September. This development favored gold, as the yellow metal neared a one-month high of $2,470.
On Tuesday, wholesale inflation data was released, which revealed that the Producer Price Index (PPI) increased by 0.1% in July. The inflation reading was largely in keeping with market expectations and further supported the odds of a more significant interest rate cut. Despite rate cut optimism, gold dipped on Tuesday amid profit taking. However, gold’s losses were limited, as the dollar index slid by 0.4% and the 10-year Treasury yield fell to a one-week low.
Investors were greeted with more positive inflation news on Wednesday, via the Consumer Price Index (CPI). Wednesday’s inflation numbers revealed that consumer inflation in the U.S. dropped below 3% annually for the first time since 2021. As a result, major Wall Street Averages continued to rally, while the S&P 500 posted a gain for the fifth consecutive session.
Elsewhere, gold and silver ended Wednesday’s trading slightly lower at $2,462, and $27.57, respectively as oddsmakers favored a 0.25% September rate cut, as opposed to a 0.50%.
On Thursday, news broke that U.S. retail sales jumped by 1% in July when a smaller increase of 0.3% had been forecasted by economists. This further supported U.S. equities, as major averages like the Nasdaq Composite rallied to within 3% of its all-time high. Gold and silver seemingly shrugged off the better-than-expected economic data, ending Thursday on a high note. Most notably, silver jumped by over 2% to a closing price of $28.20.
This morning, gold reached a fresh all-time high of $2,508, amid continued safe-haven buying, interest rate optimism, and dollar weakness. As a result, gold ended the week 3.1% higher, while silver notched a 5.3% weekly uptick, at $28.99 an ounce.
This morning’s positive retail sales data capped off a week of encouraging economic news and subsequently bolstered stocks. By today’s close, the S&P clinched its best week of the year, with a 3.8% gain. Meanwhile, the Nasdaq Composite secured a 4.9% weekly gain, while the Dow Jones Industrial Average gained 2.8%.