Silver Cruises to New All-Time High After Softer-Than-Expected Labor Report

 

Silver Cruises to New All-Time High After Softer-Than-Expected Employment Report

(Bullion News Network) – Silver gained again to end the week on Friday, continuing its historic price run to set a new all-time high above $67.25 per troy ounce. The spot price of silver added nearly $1.75 per troy ounce by Friday afternoon, bringing its total weekly gains to more than $4.25 since last Friday. The spot price of gold also increased on Friday, but the precious metal only added approximately $6.25 per troy ounce. The price action heavily favored silver, driving the gold-silver ratio to a 10-year low of 64.54:1. Platinum-group metals also saw green to end the week, with platinum gaining over $55/ozt and palladium adding around $36.80 per troy ounce. The price action expanded the gap between the two useful metals; platinum is now around $243 pricier per troy ounce than palladium. The move comes on the heels of a moderate pullback on Thursday that saw silver lose around $0.75 per troy ounce. Gold also pulled back marginally on Thursday, shedding approximately $6/ozt. 

This week, traders hoping for another interest rate cut at the Federal Open Market Committee’s January meeting got a moderate confidence boost. The November jobs report showed mixed results as the Fed hopes for a stronger labor market. Job creation stalled for another month but came in stronger than expected, with 64,000 new jobs being added compared to a median projection of just 45,000. On the other hand, the U.S. unemployment rate ticked up again, climbing from 4.5% to 4.6%, its highest percentage since 2021. The news drove the odds that the Federal Reserve will vote to cut rates higher; CME FedWatch ended the Wednesday with a projected probability of 26.6% that the FOMC will cut rates in January, compared to a reading of 24.4% a week earlier on Dec. 12.

Rate cut odds retreated again on Friday, falling to just 21%. The Federal Reserve’s December meeting was one of the most divided in years, with the meeting record noting three major dissents for the first time since 2019. Two voters wanted to see the FOMC leave rates unchanged, while Trump-appointed voter Stephen Miran advocated for a larger 50 bps cut. In his post-meeting press conference, Federal Reserve Chair Jerome Powell signaled that the FOMC may step back into “wait-and-see” mode as the economic situation in the U.S. continues to evolve.

I could make a case for either side. […] But, in this situation, you have competing [signals]. If you looked at — if you look through the SEP, you’ll see that a very large number of participants agree that risks are to the upside for unemployment and to the upside for inflation. So what do you do? You’ve got one tool. You can’t do two things at once. […]  It’s a very challenging situation.

The mixed-result U.S. unemployment report likely did little to move the needle for the Federal Reserve as it attempts to balance a cooling job market with rising inflation rates. Precious metals soared in the aftermath of the Federal Reserve’s December rate cut. Safe haven assets like gold and silver tend to appreciate when interest rates come down, as cutting interest rates is generally considered an inflationary action. Speculation surrounding interest rate cuts has also played an outsized role in driving safe haven demand throughout the year, especially after the FOMC began pulling the lever on rate cuts with its first rate reduction in September.

Next week will be light on economic data reports. Aside from the December Chicago Business Barometer scheduled for release on Tuesday, the keynote data dump of the week will be the December FOMC meeting minutes. These minutes could give traders more to consider, especially relating to the three dissents from Fed voters at last week’s meeting.

Silver ended the week with yet another all-time high after the precious metal added another $1.75/ozt to cross $67.25 for the first time ever. Gold lagged behind, gaining nearly $6.50. The price action drove the gold-silver ratio to a 10-year low.