Precious Metals Move Sideways As Stock Market Celebration Stalls

 

Gold and Silver Fall Further On Strong Dollar, High Treasury Yields

(Bullion News Network) – Gold and silver prices moved sideways this morning, notching only small losses to end a bearish week of performance for both precious metals. Gold dropped just over one dollar, while silver’s spot price dipped another $.15/oz. Interestingly, metals remain generally inversely correlated with stock market performance. After enjoying several record performances as markets seemed to celebrate what a Trump victory could mean for tech, deregulation, and USD strength, the Dow closed 300 points lower today, November 15th. While Wall Street pulled back, freefalls in gold and silver markets paused, with both metals logging only marginal losses. 

The price action today comes on the heels of a hawkish outing from Federal Reserve Chair Jerome Powell. Speaking to a group of business leaders in Dallas, Texas, Powell explained that the Federal Reserve is not “in a hurry” to further cut interest rates. Powell’s position is that economic signals suggest a strong U.S. economy, meaning that the FOMC has “the ability to approach [its] decisions carefully.” Markets reacted strongly to Powell’s commentary; CME Group’s FedWatch adjusted its projections to reflect a 41.8% chance that the Fed opts to keep interest rates at the current target range of 450-475 basis-points. 

Gold and silver are both safe haven assets that tend to negatively correlate with the federal interest rate. When the Fed moves to cut interest rates, precious metal prices often increase. This year, speculation surrounding interest rates has helped drive gold to record heights. Gold reached a fresh all-time high in mid-September when Jerome Powell’s FOMC finalized a ‘jumbo’ 50 bps rate cut, a surprising move that reflected Powell’s confidence in the strength of the U.S. economy and the progress the committee saw in mitigating record inflation numbers during President Biden’s first term in office. After the 50 bps rate cut, most analysts anticipated that the Fed would go on to reduce rates by 50 more basis-points before the end of 2024; markets expected 25 bps cuts in both November and December. 

Several factors may have contributed to Powell’s recent reluctance to hint at another 25 point cut in December. Earlier this week, the October CPI came in hotter than expected, with the inflation rate climbing from 2.4% in September to 2.6% in October. These numbers fell in line with market expectations but still suggest inflationary pressure that increases the risk of adding another interest rate cut into the mix. Powell’s commentary also comes right after a series of strong United States Dollar readings. Given President-Elect Trump’s proposal of a universal tariff on imported goods, some analysts anticipate that his second term in office could further bolster the USD while dampening the strength of other currencies, including the Japanese Yen. 

Although Powell has frequently reiterated that politics play no role in the FOMC’s interest rate decisions, it is hard to imagine that the Committee won’t consider policy-related inflationary risks as it meets to set the target rate for the first month of 2025. The Federal Reserve remains committed to its dual mandate of keeping prices low and employment high, Powell has explained multiple times this year, but a combination of weak job market readings and climbing inflation rates place the FOMC in a tricky position as it prepares for the last meeting of 2024. This difficult set of circumstances is reflected with market positions on interest rate futures; traders are unsure how the Fed will proceed, given the unique challenges facing the economy and Powell’s unwillingness to hint at any particular course of action. 

This uncertainty dampened Wall Street’s performance to end the week, but precious metals moved sideways as investors await more signals for what may be coming when the Fed meets again on December 18th.