Gold Spot Price Open: $1,276
Gold Spot Price Close: $1,257
Change in Gold Spot Price: -$19
Silver Spot Price Open: $17.18
Silver Spot Price Close: $16.47
Change in Silver Spot Price: -$0.71
After what unfolded towards the end of the day on Wednesday does a great job of explaining the price action of gold and silver today. When all was said and done, gold lost close to 20 dollars while silver lost in upwards of 70 cents. Platinum and palladium both lost on the day as well, with both metals conceding close to 15 dollars.
Gold, Silver Lose on Rate Hike Expectations
In case you missed it, the end of Wednesday brought with it the minutes from the FOMC’s most recent meeting. In those minutes it was established that most voting members of the FOMC are in favor of June rate hikes should economic data be strong enough to warrant such a move. This really came as a shock because the US economy has been consistently emitting poor piece of data after poor piece of data and no one was anticipating a rate hike at any point in the near future. Now, the outlook of the market has shifted dramatically and in such a way that now investors think a rate hike might be on its way in less than 30 days. Because of this, gold and silver spot values are suffering.
The contents of the Fed’s minutes were so shocking because, in the immediate wake of April’s meeting, the Fed did not express such clear intent on hiking rates. In fact, the tone of the post-meeting statement was one that suggested the US economy still had a long way to go before it was going to be able to withstand another rate hike. This explains why we are seeing such a noticeable reaction on the part of investors.
The reason hiked interest rates do not bode well for gold and silver is due to the fact that higher interest rates increase the opportunity cost associated with holding gold and silver in lieu of other investments. Simply put, holding gold in the aftermath of hiked rates may see you miss out on other, potentially more profitable, investment opportunities. Now it will be interesting to see just how far spot values fall in the wake of the Fed’s minutes.
Jobless Claims Fall As Expected
After hitting a 14-year high last week, the eyes of the world were always going to be fixated on this week’s report as it would indicate whether there is something to worry about with regard to the US employment sector.
Much to the relief of many people, this week’s report showed a number of jobless claims that can be more accurately defined as normal. Compared to last week’s report, this week showed that 16,000 fewer people applied for unemployment benefits than was recorded previously. Now, the seasonally-adjusted average number of claims fell from near 300,000 to just above 275,000. Though the 278,000 seasonally-adjusted number of claims is a bit higher than most would like to see, the 16,000 drop from last week’s report to this week’s is definitely enough to turn some heads.
With rate hikes seemingly on the horizon, it will be interesting to see just how much employment data affects the outlook of investors.
Wrap-Up
Thursday was interesting mostly because we got to see continued reaction to the data that was dealt on Wednesday. In addition, we received an employment report from the US that did well to quell fears with regard to employment growth and the stability of employment in the country. Now, as we look ahead to Friday, it seems as though gold and silver are going to be hard-pressed to turn things around. At this juncture the best we can hope for is a positive Friday such that weekly losses can be mitigated to some extent. Even this, however, does not seem like something that will play out due to so many factors actively working against precious metals.
