Precious Metals and Stocks Surge on Rate Hike Optimism


Last week, precious metals declined following hawkish statements from U.S. Federal Reserve officials. This week’s calendar of economic events had various Fed speaking engagements each day of the week, along with inflation data due out on Tuesday.

 On Monday, markets reacted to news from the weekend, that Moody’s Investors Services downgraded the outlook on the U.S. Government from stable to negative. As a result, stocks were little changed on Monday, while gold saw modest gains with a closing price of $1,945. Meanwhile, silver gained 1.3% on Monday, and would end trading at $22.37, while investors braced for Tuesday’s CPI data.

 On Tuesday, the much-anticipated inflation data was released, which revealed that the consumer price index was unchanged in October and had increased by 3.2% from last year. As forecasts called for a monthly increase in CPI, stocks rallied on the flat reading.

 Along with equities, precious metals would also surge on Tuesday, as the odds of a rate hike pause seemingly increased.  By the end of Tuesday’s trading, gold was 0.9% higher at $1,967, while silver was 3.8% higher at $23.24 an ounce. Metals also enjoyed tailwinds as Treasury yields and the dollar both declined following the inflation news.

 Gold and silver both held steady on Wednesday, while stocks rallied again on rate hike optimism. U.S. retail sales data was released on Wednesday, which showed that Americans reduced spending in October. This marked an end to six consecutive months of gains for retails sales in the U.S.

 On the crypto front, Bitcoin prices surged on Wednesday, seemingly fueled by optimism about the possibility of institutional adoption. At one point during Wednesday’s trading, the world’s largest cryptocurrency was nearly 7% higher and touched $37,975.23 for the first time since May of 2022.

 On Thursday, investors were greeted with a bevy of U.S. economic data in jobless claims, industrial production, import prices, and housing news. Jobless claims seemed to dominate headlines, as the number of Americans filing for unemployment benefits rose to a 3-month high of 231,000, when 222,000 was predicted by economists.

 This further supported ideas that the Fed may indeed pause its rate hiking campaign. By that point, the CME’s FedWatch Tool was predicting a 33% chance of a rate cut by March of 2023. The increased odds of a rate cut meant that U.S. Treasury yields would fall again on Thursday, as the benchmark 10-year Treasury yield reached a 2-month low of 4.43%.

 Once again, gold and silver enjoyed momentum from falling yields and the prospect of a rate hike pause. By the end of Thursday’s trading, gold had gained 1.1% at $1,965, while silver surged 2.5%, ending the day at $23.82 an ounce.

 U.S. stocks stalled this morning, as signs of a slowing economic dented investor sentiment. However, Fed rate hike optimism continued to push major averages up, leaving U.S. equities in the green for the week. As this is written, the tech-heavy Nasdaq Composite is eyeing the most significant gains out of the three major averages, at 2.9%. Meanwhile, the Dow Jones Industrial Average and S&P 500 are 2.2% higher and 2.4% higher on the week, respectively.

 Currently, gold is hovering near $1,982 which, if maintained, would be a 2.3% weekly uptick for the yellow metal. Meanwhile, silver is looking at a 7.6% weekly gain at $23.77 an ounce. 

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