Gold Spot Price Open: $1,156
Gold Spot Price Close: $1,147
Change in Gold Spot Price: -$9
Silver Spot Price Open: $15.21
Silver Spot Price Close: $15.16
Change in Silver Spot Price: -$0.05
Gold and silver fell on Friday after Thursday gains thanks to comments made by Janet Yellen after markets closed on Thursday. When all was said and done, gold lost close to ten dollars while silver lost just about five cents. Platinum continued to slide to close out the week and lost roughly 10 dollars on Friday, while palladium managed to gain more than five dollars.
Janet Yellen Expects Rate Hikes in 2015
The greenback was given another boost thanks to comments from Federal Reserve chairperson Janet Yellen. In her remarks yesterday she maintained that she expects rates to be risen before the end of the year. With the outlook on interest rates seeming to change with each passing day, this most recent commentary has investors once again convinced that perhaps rates will be risen this year. If you can recall, a poll by Reuters published earlier in the week showed that economic experts have assigned a 60% probability to interest rate hikes happening this year.
Yellen went on to say that so long as inflation remains stable and employment continues to improve, there is no reason why rates should not be hiked. All in all, this year has proven detrimental for gold, which has lost about 5% of its value thanks to expectations for raised interest rates. The reason for this is that raised rates will increase the opportunity cost of holding precious metals in lieu of other investments–namely interest bearing investments.
Upward US Economic Revision Pushes Dollar Further
The second quarter of this year, which accounted for April-June, saw even better growth than was originally reported thanks to an upward revision made public today. Officially, the US economy grew by just shy of 4% during that time frame; a very impressive number for only three months. Previous estimates held that the economy grew by just over 3.5%, which was an upbeat number when it was originally reported.
Expectations for third quarter growth are falling in the 2.2% to 2.5% range, but many economists are expecting extremely upbeat figures to be reported during this year’s final quarter. According to Jim Baird, CIO for Plante Moran Financial Advisors, “Overall, the outlook on the U.S. economy for the remainder of the year remains fairly optimistic, supported by continuing job creation, increasing consumer spending, improvements in the housing sector, and solid manufacturing numbers.” This only serves to strengthen the belief that rates will, in fact, be risen prior to the turning of the New Year.
Today’s upward revision is mostly being credited to increased consumer spending, which was up by 3.6%. Originally, second-quarter consumer spending was reported as having grown by only 3%. As has been the case, consumer spending is on the rise mostly thanks to an improving labor market and steadily falling energy prices. As the value of oil continues to dip and remain in subdued positions, consumer spending in the US is likely to remain on the up and up.
Wrap-Up
Looking ahead to next week and the last few days of the month of September, I am expecting that interest rate hike speculation will continue. There is not much going on across the global marketplace, so interest rates in the US remain a key focus for global investors. The ongoing Volkswagen scandal is also something investors will focus on. Most recent reports indicate that there is a chance more than just VW cheated on US emissions tests, but that is nothing more than speculation at this point. What we do know, however, is that this VW scandal is far from being resolved at this point.
