Gold Sees Weekly Losses Following Fed Comments and Employment News


Last week, gold notched its third consecutive weekly gain amid continued safe-haven inflows, while silver saw a modest weekly downturn. This week, investors continued to monitor developments in the Middle East while also waiting for rate hike cues from the Fed.

 Gold started this week at $1,999 and was relatively flat throughout Monday, as investors anticipated the Fed’s 2-day policy meeting which was set to begin on Tuesday and would culminate on Wednesday afternoon with an interest rate update from Fed Chair Jerome Powell. Meanwhile, major stock market averages in the U.S. notched their most significant daily gains in more than two months.

 On Tuesday, gold briefly touched $2,005 but would end the day lower, at $1,979 as investors awaited the Fed announcement. At that point, there was a 97% chance that the Fed would keep interests rates unchanged, according to the CME FedWatch Tool. Despite Tuesday’s losses, gold ended the month 7.2% higher, while stock market averages like the Nasdaq Composite and S&P 500 had their worst October performance in five years.

 As expected, Fed Chair Jerome Powell announced on Wednesday that interest rates would remain unchanged. However, Powell also underscored U.S. economic strength and stubborn inflation, which remains well above the Fed’s 2% target. In doing so, some believe Powell kept the door open for additional rate hikes in the future. Gold eased following Powell’s remarks, while stocks in the U.S. posted gains for their third consecutive session.

 On Thursday, Treasury yields fell as odds heavily favored no further intertest rate hikes for 2023. Wall Street investors also seemed to interpret Powell’s comments as dovish. At the end of trading on Thursday, the S&P 500 was 1.9% higher, while the Dow Jones Industrial Average and Nasdaq Composite both jumped by 1.7%.

 Rate hike optimism, along with a dip in Treasury yields and the dollar meant that gold would see a 0.4% uptick on Thursday, on its way to a closing price of $1,989. On the same day, weekly jobless claims data was released, which revealed that 217,000 Americans applied for unemployment benefits. This number was higher than forecasts and marked a 2-month high in weekly jobless claims.

 Rate hike optimism continued to drive stocks higher this morning, as investors shrugged off U.S. nonfarm payroll data which showed that employers added 150,000 new jobs in October, when 170,000 was forecasted. Despite this, the S&P 500 is eyeing a 5.5% weekly gain, while the Dow and Nasdaq are currently looking at is 4.8% and 5.8% respective weekly gains.

 For some, the weaker-than-expected employment news meant that the Fed was less likely to pursue a more hawkish path. Following this morning’s employment news, gold touched $2,003 but has since dipped to $1,993 an ounce. If maintained, this would be a 0.3% weekly decline for gold. Silver also surged following today’s employment news, and is currently 0.4% higher for the week, at $23.20.

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