Gold, Silver, and Stocks Plummet Amid Rate Cut UncertaintyÂ
Last week, gold plummeted while stocks soared as a Trump victory boosted the dollar index along with risk-off sentiment on Wall Street. This week, investors looked to U.S. inflation data and Fed talking points for further insight into the central bank’s rate cut outlook.
Monday saw a continuation of the post-election stock market rally, as the S&P 500 closed above 6,000 for the first time in the average’s history. Meanwhile, the Dow Jones Industrial Average and Nasdaq Composite also closed at record highs. Elsewhere, gold slipped by 2% to a closing pricing of $2,615, with pressure coming from continued dollar strength and uncertainty regarding a Trump presidency’s impact on interest rates.
The stock market rally fizzled on Tuesday, as post-election momentum fizzled. Most notably, shares of Tesla dipped by over 6%, dragging the Nasdaq Composite down by 0.9%. On the same day, gold shed another 0.7% as the yellow metal touched a two-month low near $2,600. Silver saw little change on Tuesday, hovering around $30.45 as investors looked ahead to Wednesday’s release of inflation data.
On Wednesday morning, the U.S Bureau of Labor Statistics released the latest round of inflation data, which revealed that consumer prices rose by 2.6% in October vs. 2.4% in September. The same report revealed a 0.2% month-over-month increase in consumer prices, which was in line with economists’ expectations.
Given the price increases were largely in keeping with forecasts, investor sentiment held that another Fed rate cut would be likely by year’s end. U.S. equities initially rose on this sentiment but failed to hang onto gains as Wednesday’s trading drew to a close. Gold also enjoyed a post-CPI boost, but would ultimately succumb to dollar strength, ending the day at $2,566 an ounce.
To follow up Wednesday’s inflation update, Federal Reserve Chair Jerome Powell addressed the Dallas Regional Chamber on Thursday morning. During his speech, Powell stated, “The economy is not sending any signals that we need to be in a hurry to lower rates.” The Fed Chair struck a more hawkish tone when he alluded that the U.S. economy remains resilient, despite weakness in the job market.
Following Powell’s remarks, the dollar index touched a one-year high of 107.034. Gold remained subdued amid dollar strength and uncertainty regarding the interest rate outlook, ending Thursday’s trading slightly lower, at $2,562. On the same day, silver dipped below $30 for the first time in over a month.
Gold extended its decline this morning, following stronger-than-expected U.S. retail sales data. The October retail sales report showed that U.S. retail activity increased 0.4% month-over-month, exceeding expectations of a 0.3% rise. The positive economic data bolstered hawkish Fed bets and subsequently pressured gold to the downside. As a result, gold ended the week 3.9% lower, at $2,562. Silver also encountered downward pressure from the positive economic news, ending the week 3.3% lower, at $30.24.
Rate cut uncertainty also plagued the stock market this morning. Today’s downturns were led by pharmaceutical stocks and tech shares such as Microsoft and Alphabet. As tech shares slid throughout the week, the Nasdaq Composite notched the most significant loss of the three major averages, with a 3.9% weekly downturn. The S&P 500 and Dow also ended the week in the red, with 2.4% and 1.3% respective weekly losses.