Gold Recovers Midweek Losses as Silver Challenges $30 Resistance

 

Gold Recovers From Midweek Dip, Trends Above $2,500/oz

(Bullion News Network) – Gold jumped more than $29 on Friday, recovering from a Thursday dip that drove the metal to below the $2,500 line at market close. Earlier this week, gold set a new all-time high at $2,530.30 per troy ounce as investors priced in a likely interest rate cut from the Federal Reserve. Today’s recovery from the Thursday afternoon dip reinforces increased market confidence that interest rates will decrease at the Fed’s September meeting. 

Federal Reserve Chair Jerome Powell spoke at a press conference earlier today. In his speech, Powell confirmed that the “time has come” for the Federal Open Markets Committee to begin cutting interest rates. The Federal Reserve’s next meeting will happen on September 17th, and analysts consider a moderate rate cut a virtual guarantee. Powell’s commentary this morning gave another boost to market confidence that the Fed will soon move to cut rates for the first time since March 2020. 

Interest rate speculation has been one of the most direct motivators of gold’s price-action this year. Rumors of interest rate reductions drove gold’s spot price to all-time highs in March, April, May, July, and August. Fed Chair Powell, speaking to reporters today, argued that data now suggests inflation is moving sustainably toward the central bank’s longstanding 2% target: 

My confidence has grown that inflation is on a sustainable path back to 2%. 

The announcement by the head of the U.S. central bank led gold to a recovery after a moderate dip on Thursday, August 21st. Gold prices are up nearly $30 on the day, as of 4 PM CST. 

Listen to Fed Chair Jerome Powell’s comments at his Jackson Hole press conference:

Silver Prices Climb, Gold-Silver Ratio Drops During Market Surge

Silver outpaced gold in percentage performance today, rounding out a week of gains. Like gold, silver prices dipped on Thursday as investors prepared for Fed Chair Powell’s speech. A rebound this morning saw silver jump $.90/oz, driving the metal to within $.10 of the $30 level.

Maintaining support above $30 has been a daunting task for silver bulls this year. The metal spent over half of July in the $30-31 range before diving to a three-month low of $26.60 on August 7th. Aside from two dips on August 14th and 22nd, silver prices have increased consistently since the local low on the 7th. This morning’s recovery set a monthly high for silver, placing the metal within arm’s reach of recovering that key $30 support. 

Silver’s performance secured another daily drop in the gold-silver ratio, a figure used to express the price differential between the two precious metals. The GSR will end Friday at just over 85:1, which is a 4+ point reduction from August’s high of 89.59:1. If silver continues to outpace gold, expect the GSR to continue falling as the relative value of silver increases. 

August Precious Metals Market Forecast: What To Expect This Month

Several key economic data reports due for release in late August will give traders more insight about what to expect from the Federal Reserve’s September meeting. Economic reports scheduled for August include: 

• Consumer Confidence – August 27th.
• Initial Jobless Claims – August 29th.
• Q2 U.S. Gross Domestic Product (GDP) – August 29th. 
• Personal Consumption Expenditures (PCE) – August 30th. 

A .25 point rate reduction is virtually guaranteed at the Fed’s September 17th meeting, but a half point rate cut may become a realistic possibility, depending on the outcome of August’s remaining economic data reports. In particular, expect the August 29th jobless claims report to play a key role in signaling how significant of a rate cut to expect from the FOMC when the committee meets in September. 

Here is what the markets now expect for rate cuts by the #FederalReserve.#econtwitter #markets #inflation #unempoyment #federalreserve #economy pic.twitter.com/Xhu1Hd4MhS

— Mohamed A. El-Erian (@elerianm) August 23, 2024

Chair Powell has made it clear that an unexpected weakening in the U.S. jobs market could provoke aggressive action from the Fed regarding interest rates. Here’s what the central bank head had to say at a press conference on July 31st: 

If the economy remains solid and inflation persists, we can maintain the current target range for the federal funds rate as long as appropriate. If the labor market were to weaken unexpectedly or inflation were to fall more quickly than anticipated, we are prepared to respond. 

Data from the Personal Consumption Expenditures (PCE) report could also impact how severely the Fed will cut rates in September. The PCE is one of several core metrics used by the Federal Reserve to gauge inflation. A significant drop in the inflation rate may provoke a more aggressive rate cut from the Fed, especially considering Powell’s commentary. 

Interest rate speculation has been a primary driver for gold and silver prices in 2024, so investors should expect more of the same as a growing U.S. economy looks forward to its first interest rate cut in over four years.