Despite mostly holding their own in the first half of the week, precious metals took a dive to wrap things up. As you might have guessed, the biggest story of the week came in the form of the 2-day FOMC meeting, which wrapped up with a post-meeting statement Wednesday afternoon. There were a few noteworthy pieces of economic data dealt too, but with all the attention focused on the Fed many of these data points came and went without too much of a reaction on the part of investors.
As for what the future holds for precious metals, that much remains unclear. Right now, we are seeing both gold and silver suffer at the hand of a stronger US Dollar. To put that much into perspective, the USD Index on Thursday hit a 13-year high while both gold and silver were at their lowest points in 10 and 8 years respectively. On Thursday alone, silver’s spot value took more than a $1 dive.
FOMC Raises Rates, Plans to Continue Raising Them
When, on Wednesday, the FOMC finally announced their plans to hike interest rates by 25 basis points (bringing the new range to .50%-.75%) the news did not come as much of a surprise to anyone. In the lead-up to the announcement, almost every poll you could find showed that there was a 100% expectation that a rate hike would be announced. As such, it was believed that the decision had already been priced in by investors and, thus, would not have as much of a negative impact on precious metals. While this much did prove to be true, what took folks by surprise was the fact that the Fed alluded that they would like to continue hiking rates throughout 2017, with as many as 3 additional hikes in the cards.
This was surprising because people who had been speculating with regard to the possibility of more hikes in 2017 only ever thought that we would see a maximum of 2 additional hikes. Though 3 additional rate hikes is something that will be entirely dependent upon the conditions of both the domestic and global economies, the fact that they are on the table was big news. As a result, both gold and silver took a hit. That hit was extended on Thursday as overseas investors had a chance to react to the news. Even crude oil prices that are hanging on to recent gains were not enough to prevent metals from falling dramatically throughout the day on Thursday. Despite a slight recovery on Friday, the week was mostly lost for metals.
Weekly Jobless Claims Fall, Retail Sales Disappoint
For a second consecutive week, first-time claims for unemployment benefits fell. This time, there were 4,000 fewer people filing for first-time benefits last week than there was 2 weeks ago. With a new seasonally-adjusted average number of claims ringing in at 254,000, we are now sitting at 93 consecutive weeks where the number of claims has been below the 300,000 mark. As was mentioned above, the focus on the FOMC ensured that this piece of data received very little attention.
Another report, released a day earlier, showed that November retail sales moved forward by just .1% from October. Expectations had called for a .3% rise so it is clear to see why this data was viewed as a miss. Once again, however, investors did not pay this report much mind as they were consumed with the Fed. Even though this data point missed the mark, we can take solace in the fact that retail sales are still getting better month by month. This points to an economy with consumers who are confident about their financial situations and willing to spend money rather than let it sit in a bank account.
Next week is the last full week of trading before the Christmas holiday, and even though Christmas is not until Sunday, you can expect that things will be fairly slow as most investors will be taking time off to visit family, friends, and loved ones.
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