Gold News

Gold and Silver Prices Erase Rally as Powell 'Confuses the Markets" Again

GOLD and SILVER both gave back a small rally on Wednesday to trade little change for 2023 to date after comments from Federal Reserve chairman Jerome Powell again confused analysts and pundits over the Fed's outlook for inflation and interest rates.
"Fed Chair sticks to the script. More rate hikes are coming," says Barron's following Powell's answers yesterday to questions from his audience at the Economic Club of Washington.
"[But while] Powell's speech was hawkish," says CNBC, "investors' mood was bullish."
"This divergence between the Fed policy outlook and financial market expectations has remained notably wide and in turn underpinned the recovery in gold," says a new note from specialist analysts Metals Focus.
"We continue to believe that interest rate cuts are unlikely this year," says the consultancy, the 3rd most bearish forecasters for gold in the new LBMA 2023 Forecast Survey competition. "This, coupled with falling inflation, will lead to rising real rates and in turn undermine gold prices as we move ahead in 2023."
Gold today fell back almost $15 per ounce from an earlier rally to 4-session highs at $1886, while silver dropped 25 cents from its peak above $22.50.
Chart of gold in US Dollars, last 3 months. Source: BullionVault
Betting on 'no change' in Fed rates at its next meeting in March has now evaporated to zero, according to data from the CME derivatives exchange, with speculators instead putting 94% odds on another quarter-point rise and 6% odds on a half-point hike.
Betting on December's decision meantime sees a 2-in-3 shot that the Fed will end 2023 higher from today's rate of 4.75%, leaping from just 1-in-8 this time last week.
Longer-term US interest rates slipped back Wednesday from yesterday's new 5-week high at 3.67% on 10-year Treasury yields.
For European investors as well, "I would strongly advise interpreting the latest [European Central Bank] statement for what it is," says German Bundesbank president Thomas Nagel in what financial magazine Boersen Zeitung calls "a clear warning to the markets" – "a robust announcement that points beyond the March meeting.
"From where I stand today we need further, significant rate hikes...But I find it right that we proceed step by step."
Western gold investment flows were mixed overnight, with the giant SPDR Gold Trust (NYSEArca: GLD) expanding 0.3% to need 920.8 tonnes of bullion backing, the most since end-October, but the smaller iShares gold ETF (NYSEArca: IAU) shrank 0.4% to need fewer than 450 tonnes, edging back to its smallest since New Year.
Silver's giant iShares ETF product (NYSEArca: SLV) meantime grew 0.5% to need over 14,946 tonnes of bullion backing – equal to more than 6 months' global silver mine out – after expanding for the 3rd session in a row to the biggest since start-November.
Global stock markets rose within 1% of last Thursday's 6-month high on the MSCI World Index, while crude oil also rallied further from its recent sell-off, adding 1% to European benchmark Brent, after US data said energy stockpiles in the world's largest economy shrank last week rather than growing as analysts forecast.
Swing producer Saudi Arabia on Monday raised its export price for Asian oil consumers. Shipments out of Turkey's key oil port of Baku-Tblisi-Ceyhan terminal in the Mediterranean are meantime suspended following Monday's devastating earthquake in the region.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals