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Precious Metals and Stocks Surge Amid Rate Cut Optimism
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Last week, gold rallied to a new all-time as the odds of a September interest rate cut increased. This week’s calendar of economic events was light, while investor focus remained on Fed commentary via FOMC meeting minutes, along with scheduled remarks from Fed Chair Jerome Powell.
Markets were quiet on Monday, with investors focused largely on events scheduled for later in the week. Despite muted trading volumes, U.S. equities managed daily gains, as the Nasdaq Composite exited correction territory. Meanwhile, gold and silver were little changed at $2,501 and $29.41, respectively.
On Tuesday, the S&P 500 and Nasdaq snapped their eight-day winning streaks as investors awaited Wednesday’s release of the minutes from July’s FOMC meeting. Elsewhere, gold jumped to a fresh all-time high near $2,518 an ounce. Gold’s move upward was aided by the dollar index, which sunk to a seven-month low, making the yellow metal more attractive to foreign currency holders.
On Wednesday, investors digested minutes from the Fed’s July meeting, which indicated that central bank officials were heavily in favor of slashing interest rates in September. Wednesday’s rate cut optimism boosted Wall Street sentiment, which led to gains for major indexes.
On the same day, the Labor Department released a shocking downward revision to employment data. The data revealed that 818,000 fewer jobs were created in the U.S. during the twelve months leading up to March 2024, than what was previously reported. This marked the most significant downward revision to employment data since the 2008 financial crisis.
Following the employment news gold pared earlier losses and ended Wednesday’s trading at $2,510 an ounce. On Thursday, weak manufacturing data led to risk-off sentiment on Wall Street, which pressured equities to the downside. The Nasdaq recorded the most significant loss at 1.8%. Gold also dipped on Thursday, as the dollar index rallied from a seven-month low. As a result, gold broke below the $2,500 mark. By the end of Thursday’s trading, gold notched a 1% daily loss at $2,474. Silver followed suit and shed 2% on its way to a closing price of $28.84.
This morning, Fed Chair Jerome Powell addressed an audience at the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming. The Fed Chair alluded to imminent rate cuts when he stated, “The time has come for policy to adjust.” During his address, Powell also cited slowdowns in the labor market and stated that the downside risks to employment have increased.
Stocks jumped following Powell’s remarks, as the S&P 500 neared a record high on its way to a 1.3% weekly gain. Following today’s Fed-fueled rally, the Dow Jones Industrial Average and Nasdaq Composite notched 1.1% and 1.2% respective weekly upticks. Meanwhile, the dollar index dipped 0.8% against its rivals as U.S. Treasury yields retreated.
Powell’s commentary, along with the dollar downturn also supported precious metals this morning, as gold climbed by 1%. Following today’s gains, gold ended the week 0.4% higher, at $2,511. Silver was sharply up following Powell’s remarks, as the gray metal notched a 3% weekly gain at $29.82.
