General discussion, page-1907

End of Week Precious Metals Overview – November 4, 2022

Metal prices rose sharply on Friday, rising by more than $50.00 after the U.S. jobs data reported an increase in the Menschen unemployment rate from 3.5% to 3.7%. Despite a higher-than-expected job report, analysts have come to believe that the labor market may finally be cooling – and with it the severe rate hikes that the Federal Reserve has been dispensing. Gold settled at $1682.00, a rise of $36.50 for the week; silver finished at $20.85 a gain of $1.60.

It appeared that this was going to be another poor weekly performance for the metals. The Federal Reserve raised interest rates by 75bp on Wednesday, just as expected. Gold and silver initially “popped” to $1669 after the Fed announcement on investor optimism in the wording of the Fed statement signaling a possible lightening of future increases. However, that was dashed by Fed Chair Jerome Powell shortly thereafter, saying:

“Investors are getting ahead of themselves and thoughts about a potential pause would be “very premature”. He also noted that the window for a soft landing for the U.S. economy has “narrowed” but that it is “still possible”.

Gold fell to $1635 by the end of trading on Wednesday. The decline continued, with gold slipping to its week low - and a 2 ½ year low of $1617 just prior to the New York open on Thursday. Silver followed a similar pattern, rising briefly above the $20 level after the Fed statement and then falling to $18.85 by Thursday morning.

The rise in prices on Friday began in Hong Kong and continued throughout the day, with gold closing at the week high of $1682.00 and silver climbing to $20.90 before giving back a few pennies at the close.

Equities had a tough week, with the DJIA and NASDAQ losing 1.40% and 5.65%, respectively, on the prospect of still higher interest rates. Oil prices rose on rumors that China may ease some of their harsh COVID policies. The U.S. dollar was flat for the week; this despite a decline of 1.9% on Friday – its largest one-day percentage loss since November of 2015.

It remains to be seen if the FOMC will refrain from another 75bp rate increase in December. Further economic reports must be released and analyzed for signs of a slowing economy. Gold prices have declined for the 7th month in a row, the longest stretch of monthly declines since 1982. Cynics may say that the market was seeking a reason to rally, and the decline in the U.S. dollar on Friday (its biggest one-day daily decline since March of 2020, coupled with the rise in the unemployment rate to 3.7% created a “perfect storm” for this day. Keep in mind that the Fed is not done raising rates, inflation is still stubbornly high, and the labor market has not yet slowed. Whether this rally in the metals is real and can follow through still remains to be seen.