Gold and Silver Stabilize as Oil Prices Pull Back

 

Gold and Silver Stabilize as Oil Prices Pull Back

(Hero Bullion News) – Precious metals ended the trading day on Monday largely flat, a rare calm day amid a quarter full of volatility. The spot price of gold lost less than $10 per troy ounce, holding above the $5,000 support line. Silver prices gained on the day, adding approximately $0.34 per troy ounce to cross $81/ozt. The price action favored silver by a slim margin, driving the gold-silver ratio less than 0.5 points lower to 62.14:1. Platinum group metals saw a larger price bump to start the trading week. The spot price of platinum gained more than $90/ozt, crossing $2,125 per troy ounce. Palladium gained approximately $60 per troy ounce but remains significantly cheaper than platinum at approximately $1,637 per troy ounce. A Federal Reserve meeting scheduled for Wednesday is slated to be the major financial headline of the week, though the FOMC is largely expected to keep rates unchanged for the month of March. The price of oil and the ongoing war in Iran will likely continue to impact demand for safe haven assets throughout the week.

Wall Street broke a losing streak to open the week in the green as slipping oil prices drove a bit of optimism. The Dow gained more than 380 points as the price of crude oil shed over 4.5% to drop below $93 per barrel. Prices spiked overnight, coming within $2 of $100 per barrel as the war in Iran continued to threaten access to the Strait of Hormuz, a vital oil trade chokepoint through which around 20% of the global oil supply travels annually. Iran vowed earlier this month to continue to block the Strait of Hormuz, while U.S. President Donald Trump threatened further escalation if oil tankers and other trade ships are not allowed to pass. Multiple nations have released oil reserves in an attempt to mitigate climbing gasoline prices, including the United States, Japan, and the International Energy Agency (IEA). Oil prices retreated on Monday, injecting Wall Street with a bit more life but leaving safe haven assets like gold and silver largely unchanged.

Domestically, the FOMC will meet on Wednesday to determine interest rates for the month of March. This month, a worse-than-expected U.S. employment report drove speculation that the Fed will opt to keep rates unchanged at its March meeting. Last week, a fresh inflation report revealed that consumer prices have continued to rise, virtually eliminating any expectation that the FOMC will vote to cut rates on Wednesday. CME FedWatch projects the probability that the FOMC will cut interest rates at 0.9%, down from 1.7% last week and 9.2% one month ago. The war in Iran could also cause the Fed to wait before making any aggressive changes to the federal interest rate, since cutting rates can compound the inflationary impact that armed conflict tends to have on the economy.

Federal Reserve Chair Jerome Powell will speak to reporters following the interest rate decision on Wednesday. Powell’s press conference could also be a major story for precious metal traders to watch. In particular, Powell is likely to address how the Federal Reserve believes the ongoing war in Iran could impact the economy. Powell will also respond to recent U.S. employment data and inflation numbers, both of which will play an outsized role in determining when the Fed decides to proceed with cutting rates. Powell will also deliver a speech on Saturday.

Gold and silver prices moved little on Monday as traders on Wall Street celebrated a brief pause in rising oil prices. The spot price of gold lost less than $10 per troy ounce, while silver prices climbed by approximately $0.34/ozt. Later this week, developments in the Strait of Hormuz and the Federal Reserve’s Wednesday meeting should play a role in how demand for safe haven assets like gold and silver shifts amid a volatile market landscape.