Precious metals had a positive week by all accounts and are continuing to look stronger and stronger by the day. To be fair, this 5-day trading session offered very little in the way of fresh, fundamental data, but that did not stop investors from continuing to speculate with regard to what is going to happen to US interest rates come this time next week.
All in all, gold and silver made gains almost every day this week and are both nearing completely undoing losses that occurred over the past 3 or 4 weeks. With silver back above $17/ounce and gold edging in on $1,300/ounce, things are beginning to normalize. This recently upbeat technical posture by gold and silver is great for the near-term outlook. This is especially true when you consider we are about to be in the midst of the slow summer months, so if gold and silver can remain on an upward trend, it may be able to be sustained throughout the foreseeable future.
Interest Rate Hikes Almost Entirely Priced Out
Little more than a week ago, investors the world over were confident that next week’s FOMC policy review meeting would culminate with an announcement explaining that interest rates in the United States were going to be risen. Due to a combination of commentary from the Fed and upbeat economic data, all signs were pointing in the direction of a rate hike for the first time in roughly a half year. Towards the end of last week, however, those expectations were entirely altered thanks to a May non-farm payrolls report from the US Department of Labor that fell so very far short of expectations.
Polled experts were expecting a minimum of 100,000 new jobs having been created in May, but the actual figures showed just a fraction of that. When the report was finally released last Friday, investors were shocked to see that fewer than 40,000 new jobs were added to the economy last month. This report was not only weak, it was one of the weakest we have seen in years. All in all, a bit of a panic set in in the report’s wake, and investors reversed most of their moves and began quickly coming to terms with the reality that interest rate hikes may be delayed once more.
Now, we are seeing a global investing market that is not expecting any sort of shift in policy come the conclusion of next week’s FOMC meeting. In fact, there is now only a meager 25% likelihood that rates will be hiked in July. It’s amazing to see how quickly that tables have turned, as not long ago rate hikes were expected to take place next week and then again in July. With all this being said, the Fed very well might hike interest rates next week, but few people are holding their breath.
Throughout the week we were dealt some small pieces of economic data, but all in all very few new developments were on the table to talk about. Understandably, investors are trying to make sense of the marketplace now that interest rate hikes are not much of a concern. With the slow summer months beginning to set in, it is difficult to envision just how the Fed will justify raising rates within the coming months. Regardless of this, you can bet that most every investor is going to continue speculating.
Crude oil and natural gas equities performed well this week, as did US stocks, but when the dust settled it is clear to see that both gold and silver have emerged victorious over the course of the past 10 days or so. When things pick back up again next Monday, it will be intriguing to see if gold and silver can push even higher, because momentum is clearly on their side.