Gold, Silver, and Stocks Plummet Amid Fed Hawkishness
Last week, gold managed a modest weekly uptick as rate cut optimism supported non-yielding bullion. Although this week’s economic calendar included key events like U.S. GDP, jobless claims, and inflation data, investors were primarily focused on the Fed’s interest rate announcement and its 2025 rate cut forecast, scheduled for Wednesday.
Gold and silver started the week at $2,653 and $30.58, respectively. The pair saw little change on Monday, as investors looked ahead to Wednesday’s rate cut announcement. Elsewhere, the Dow Jones Industrial Average dipped on Monday, marking eight consecutive losing sessions. Meanwhile, surging tech stocks led the Nasdaq Composite to a record close.
Non-tech profit taking pressured the Dow lower again on Tuesday, leading to its 9th straight loss. On the same day, gold encountered mild losses on its way to a closing price of $2,646 as dollar strength and elevated yields pressured bullion to the downside. By Tuesday, the CME FedWatch tool signaled nearly a 100% probability of a 0.25% rate cut on Wednesday. However, investors were more focused on the Fed’s so-called dot plot, which offers insights into the projected trajectory of the Fed funds rate over the next year.
On Wednesday, the much-expected 25 basis-point rate cut was announced, bringing the Fed funds rate to 4.25-4.50%. However, the Fed’s dot plot revealed a hawkish pivot, in that only two 0.25% rate cuts were forecasted throughout 2025. Stocks plummeted following this development, as the S&P 500 and Nasdaq shed 2.8% and 3.6%, respectively. Meanwhile, the Dow dropped by 2.6%, marking a 10th consecutive daily downturn for the first time in 50 years.
Non-yielding gold tumbled by more than 2%, following the Fed update, dipping below $2,600 for the first time in over a month. While gold ended Wednesday’s trading near $2,585, silver fell to a three-month low of $29.51 as the dollar index surged to a 2-year high.
Gold managed to trim some of its losses from the previous session on Thursday, as fears of a U.S. Government shutdown loomed. Despite this, the yellow metal failed to reclaim the $2,600 level, while silver ended the day slightly lower, at $28.94. Stocks were mixed during Thursday’s trading, as the 10-year Treasury yield surged to 4.5%. Despite elevated yields, the Dow Jones Industrial Averages managed to eke out a small gain, ending its 10-day losing streak.
Gold extended gains this morning, as the dollar the Treasury yields stalled, following the release of PCE data, which indicated that inflation slowed in November. As a result, gold is on track for a 1% weekly decline at $2,625, while silver is heading for a steeper weekly loss of 3.4% at $29.54 an ounce.
Encouraging news on the inflation front boosted Wall Street sentiment this morning, as the Dow, S&P 500, and Nasdaq all notched daily gains. However, all three major indexes posted weekly losses of around 2.2%.