Gold & Silver Gain Traction as Inflation Dominates Market Sentiment

Gold and Silver Today

Gold and silver futures are trading higher as market participants continue to react to multiple events. As of 3:03 PM EST gold futures basis the December contract is currently up $8.60 or 0.49% and fixed at $1748.90. The December contract will soon move to the first notice day with the most actively traded contract month moving to February 2023 which is currently fixed at $1763.60 after factoring in today’s gain of $8.30.

Silver futures have recovered approximately half of yesterday’s 2 ½% price decline. Currently, the December futures contract is up $0.26 or 1.24% and fixed at $21.175. The dollar had fractional gains today and is trading well off of this morning’s lows which took the dollar index to 105.995. Currently, the dollar index is up 0.12% and fixed at 106.765.

Key Fundamentals

Concern regarding China’s economy based on their Covid restrictions diminished today resulting in a strong rally in Chinese equities last night.

Consumer confidence in the United States dropped to a four-month low in November. A survey released today by the Conference Board revealed that the consumer confidence index dropped to 100.2 in November from 102.2 in October.

This is the lowest level of confidence since July. This survey revealed that U.S. consumers continue to be overly concerned about the high-level inflation and interest rate hikes by the Federal Reserve raising the cost of borrowing.

Tomorrow Chairman Powell will deliver a speech sponsored by the Brookings Institution in Washington. Typically, the chairman would focus on the labor market at this venue however, he is expected to clarify the Federal Reserve’s upcoming rate hikes. It is hoped that his statements will reduce the consumer angst from recent hawkish statements made by multiple Federal Reserve officials.

Last week James Bullard President of the St. Louis Federal Reserve Bank expressed that the Federal Reserve’s benchmark Fed funds rate could go as high as 7%. Yesterday he stated that “the Federal Reserve will likely need to keep its benchmark policy rate north of 5% for most of 2023 and into 2024 to succeed in taming inflation.”

On Friday the BLS will release last month’s nonfarm payroll jobs report. Early forecasts are anticipating that there will have been an additional 200,000 jobs added last month. This would be a decline from the prior month’s jobs report which revealed 315,000 new jobs were added to U.S. payrolls.

Conclusion

The takeaway from recent economic reports and statements made by Federal Reserve members is clear. The Fed most likely will begin to reduce the size of individual rate hikes however, these rate hikes will continue for an extended time until the Federal Reserve comes close to its 2% inflation target.

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Wishing you as always good trading,

Gary S. Wagner