Even though this week’s losses do not come close to replicating what we saw a week ago, precious metals still did have a pretty rough go of things these past 5 days. The simple fact of the matter is that an overwhelming majority of investors are under the impression that interest rates are going to be risen in December, and so long as that is the case gold and silver are going to suffer; it really is as simple as that.
The economic data stream was light, but we did have a few happenings that caught the attention of investors, including some commentary from members of the Fed as well as the release of the minutes from the latest FOMC meeting. In addition, the weekly jobless claims report was due out as usual, and as usual it caught the undivided attention of the marketplace.
Jobless Claims Remain Strong
As was just mentioned, one of the biggest concerns for investors is the state of the labor market in the United States. Ever since the interest rate hike discussion began well over a year ago now, the FOMC has time and time again reiterated that it will only move to raise rates so long as the labor market is strong and inflation is at least nearing target levels. Despite inflation sort of lagging behind, the job market has been quite strong over the past year, and especially in recent months.
This week saw the weekly jobless claims report once again defy expectations by remaining unchanged from last week’s downwardly revised 246,000. If you remember, the Department of Labor last week reported that the seasonally-adjusted average number of claims fell to 249,000. That number was later revised downward by 3,000. This is significant primarily because most investors and market experts alike were anticipating that the seasonally-adjusted average would tick above the 250,000 threshold. Even if that was the case, it would not have sent much in the way of shockwaves across the US and global marketplaces, but the fact that the data remained lower than expectations continues to lend support to the thought that rates will be raised come the December FOMC meeting.
In fact, at the present moment in time, there is a percentage chance for December rate hikes in the realm of 65%. That is the highest percentage we have seen in months and will only continue to grow so long as the data from the US remains upbeat.
FOMC Minutes Released
Considering the circumstances, it should come as absolutely no surprise that the release of the minutes from the FOMC’s latest meeting garnered as much attention as it did. Of course, also as you might expect, the minutes did little in the way of explaining when a rate hike will come. There was very little specific mention of the month of December, and when it came down to it we once again heard the Fed saying that they were going to be ready to raise rates when economic conditions permitted.
Thanks to the overwhelmingly lackluster nature of the FOMC’s minutes, the market really did not have much of a reaction. If anything, the case for a December rate hike strengthened; even if only slightly.
As we look forward to next week, you can expect to see much of the same as far as what the main conversation is. Investors will be looking to anything and everything that they think will give them a more concrete answer as to whether or not rates will be hiked come December. In addition to this, the Dollar will be interesting to watch. After hitting multi-week highs against a number of currencies during the week, the greenback backed down over the last two days. This alleviated some of the pressure facing metals, which is a welcomed relief at this juncture. Until we see a more dramatic change, the real story will be what metals can do—or what can happen in the outside markets—to reduce some of the downward pressure. So far, bargain-hunting is helping keep spot values from falling too much further, but that help is coming in the form of minimized losses, not gains.