This week started off slowly and was really devoid of much activity other than focus on the US Dollar and stock market activity. Precious metals spent the first few days of the week moving downward, but by Thursday things had turned around almost entirely. As you might expect, the major focus of the marketplace remains what is going to happen to interest rates in the United States. Comments from members of the Fed this week have given these talks a boost, but as is typical the commentary we received seems to contradict itself.
Reuters Poll Shows Expected Fed Rate Hike Timing
According to economic experts polled by Reuters, the most likely time for an interest rate hike in the United States will be this upcoming December. Of those polled, most everyone thinks that, if rate hikes are going to happen, they will happen shortly before the turn of the New Year.
With that being said, those polled have assigned a 60% probability to December rate hikes. It is important to keep in mind that a similar poll earlier this year indicated that most economic experts thought that rates would be hiked in June, so you should know how reliable this information is.
In addition, Atlanta Federal Reserve chairperson Dennis Lockhart explained that while rate hikes can still be expected to take place this year, they are not guaranteed to be hiked. Inflation, which remains steady at about .2% in the US, is something that is concerning for many members of the Federal Reserve. The Fed has made it a goal that inflation in the US should be at a steady 2%, but we are currently very far from that goal. When Lockhart was done speaking on Thursday, gold and silver spot values were given a boost thanks to renewed uncertainty regarding whether or not interest rates would actually be hiked.
Janet Yellen Pushes Dollar Forward
Thanks to a speech made by Janet Yellen yesterday after markets closed, the Dollar rallied after a few days of consecutive losses. The Dollar gained so dramatically that it pushed gold and silver spot values right back downward after gains were made over Wednesday and Thursday.
Despite Lockhart looking down upon current levels of inflation, Yellen maintained that so long as inflation does not decrease and remains stable rate hikes are likely to happen before the end of the year. When it comes down to it, people are still unsure what to think about rate hikes. We have heard Yellen be confident in the hiking of rates before, so this tone we are hearing now is nothing unusual or out of the ordinary.
As we look ahead to next week and the beginning of October, you can bet that the main stories will revolve around what will soon happen, or not happen, to interest rates. In addition, we will continue to monitor a story out of Europe that claims car producer Volkswagen cheated during US emissions tests. This is important to the precious metals industry because platinum, which is used in car’s catalytic converters, may not be as highly demanded going forward. Not only are people expecting the demand for diesel cars to go down, China’s economic slowdown and overproduction of the metal in South Africa are also contributing to the not so bright outlook on platinum going forward. This week alone, platinum’s spot value moved almost exclusively downward. This has not necessarily weighed on gold and silver spot values, but it definitely has the chance to do so.