Gold and silver lost by significant margins this week as expectations that interest rates will be hiked in the near-term future have picked up significantly. Being that this week featured both the end of February trading and beginning of March trading, it really shouldn’t come as much of a surprise that so much economic data was dealt. To be truthful, however, much of that economic data only served the purpose of adding fuel to the fire of rate hike expectations.
As we look ahead to the first full week of March trading, you can expect that the economic data will continue to stream in.
Undoubtedly the biggest news of the week was that so many high-ranking, influential members of the Fed began speaking up with regard to when rate hikes should happen. Up to this point, many of these same officials have avoided being too specific with regard to their feelings on further rate hikes. This week, the likes of William Dudley and John Williams—both of whom are presidents of individual Federal Reserve banks—spoke up and, in so many words, alluded that it would be foolish for the Fed to take too much time with regard to moving on rate hikes.
Add to this a solid week of economic data, and investors have slowly but surely altered their expectations with regard to when rates will be hiked. While only a few weeks ago it was looking like we wouldn’t see a rate hike until May or June, there is now a very good likelihood that we will receive one this month. Understanding that this is still the Fed, there is always a chance that the expectations of investors are not met.
Being that this week saw the month of February come to an end, it should come as no surprise that it also saw the release of quite a bit of economic data from the United States and Europe. As for the US data, the tone was overwhelmingly positive and pointed to the widespread belief that the US economy is performing quite well at the present moment in time. Consumer confidence was reported this week as being the highest it’s been in more than 15 years. Though GDP from the first month of the year was not quite as strong as anticipated, the data was mostly overlooked as it missed by only small margins.
Another big talking point for the week was President Donald Trump’s first address to Congress since taking office late in January. Investors and common citizens alike were anticipating that this was the speech that would delve into the details of his fiscal policy, but they were once again disappointed in that regard. Though he did make mention of massive tax breaks for businesses as well as the middle class, he failed to elaborate and no one really found out anything they didn’t know. As such, his commentary was mostly ignored as investors instead decided to focus on rising rate hike expectations.
Finally, there was another upbeat batch of weekly employment data. According to the US Department of Commerce, the seasonally-adjusted average number of employment claims has fallen to just 223,000. Most experts were anticipating this reading to be well over 240,000, so it was an overly positive piece of data. Once again, all this does is reinforce the belief that the US economy is strong enough to support higher interest rates in the near future. As we go forward and through the first few weeks of the month, you can expect that rate hikes will be the central topic of discussion.