Precious Metals Surge As Rate Cut Beats Expectations
Last week, precious metals secured gains while U.S. equities capped their best week since 2024, amid increased odds of a more aggressive 0.50% interest rate cut. The key item on this week’s calendar of economic events was the Fed’s interest rate decision, which was set for Wednesday afternoon.
Gold traded in a tight range near $2,584 on Monday, while silver hovered near $30.85 as investors prepared for Wednesday’s interest rate announcement. Meanwhile, the Dow Jones Industrial Average jumped by 0.6% on its way to a record close of 41,628.22 as rate cut optimism permeated Wall Street.
On Tuesday, data from the Census Bureau revealed that U.S. retail sales rose by 0.1% in August, topping Wall Street forecasts calling for a 0.2% decline. The stronger-than-expected economic data cast some doubt that the Fed would pursue a 0.50% rate cut as opposed to a more conservative 0.25% rate cut. As a result, stocks finished Tuesday’s trading slightly lower. Elsewhere, gold pulled back from record highs achieved in the previous session, with a closing price of $2,572.
This week’s gathering of the central bank’s Federal Open Market Committee culminated on Wednesday when Federal Reserve Chair Jerome Powell announced the first interest rate cut in over four years. During his speech, Powell announced that the Central Bank would cut interest rates by 0.50%, bringing the benchmark federal funds rate to a range between 4.75% and 5%.
Following the news, non-yielding gold surged by 1% on its way to a fresh all-time high of $2,598. Meanwhile, silver jumped by 3% while the dollar index fell to a fourteen-month low of 100.21. News of a jumbo rate cut spurred a risk-on mood throughout Wall Street as the S&P 500 and Dow Jones Industrial Average both reached all-time highs immediately following Powell’s announcement. However, trading proved to be volatile for equities as all three major averages ended Wednesday’s trading slightly lower.
U.S. stocks quickly shifted into a fed-fueled rally when on Thursday, the Dow breached 42,000 for the first time, while the S&P 500 and Nasdaq secured 1.8% and 2.9% respective daily gains. On the same day, gold hovered near a record high just below $2,600 while silver gained another 3%. The pair enjoyed a trifecta of tailwinds in the recent rate cut news, geopolitical concerns, and dollar weakness.
After stocks opened lower this morning, the Dow managed to recover and close over 42,000 for a fresh record close. Both the S&P 500 and Nasdaq were not able to bounce all the way back to beat yesterday’s close but all three major indexes notched weekly gains.
Precious metals continued their momentum to finish out a strong week with gold hitting fresh all-time highs. Gold finished out with a weekly gain of 1.58% to $2,635.92, with silver closing out the week at $31.39 per ounce for a gain of 0.84%.