EDITOR'S NOTE: Gold and silver jumped 1.56% and 3% respectively after Fed Chair Jerome Powell indicated that the Fed will soon scale back rate hikes. Markets are expecting a 50-basis point hike in December. To most investors, it almost doesn’t seem to matter that slower rate hikes nevertheless point to higher interest rates in the future. Right now, markets are rallying and precious metals investors are seeing this as a last-chance opportunity to get in at discount levels. As we’ve been saying for months, gold and silver can’t possibly sustain such levels for too long; particularly when you factor in economic fundamentals which have been pointing to higher gold and silver prices for quite some time.
Gold prices rose over 1% on Wednesday as the non-yielding asset races to end its best month since mid-2020 on slower U.S. rate hike expectations, further reinforced by Federal Reserve Chair Jerome Powell’s comments.
The Fed could scale back the pace of its interest rate hikes “as soon as December,” Powell said on Wednesday, while warning the fight against inflation was far from over.
Spot gold rose 1% to $1,767.52 per ounce by 3:03 p.m. ET (2003 GMT). U.S. gold futures settled 0.2% lower at $1,759.9.
“The market focused exclusively on Powell’s clear signal that rate hikes will slow to 50 bps in December which has the precious metals complex rally,” said Tai Wong, a senior trader at Heraeus Precious Metals in New York.
“The market is ignoring the rest of the (Powell) speech which emphasizes higher for longer and no early rate cuts,” Wong added.
The Fed has been aggressively raising interest rates this year, which raises the opportunity cost of holding gold that does not bear any interest.
Following a seven-month losing streak, the metal is set for an over 8% monthly rise in November, its biggest since July 2020 thanks to recent comments from several Fed officials supporting slower rate hikes.
Markets now await the Labor Department’s closely watched non-farm payrolls data on Friday for cues on the jobs market strength, which could influence the U.S. central banks further policy decisions.
The dollar dropped after the speech, making gold cheaper for overseas buyers.
In other metals, spot silver jumped 4.2% to $22.14 per ounce, on course for its best monthly gain since December 2020.
Platinum gained 3.5% to $1,037.01, en route to its biggest monthly gain since November 2020.
Palladium was up 3% at $1,889.25 after jumping to $1,933.04 earlier. It was up about 2.6% for the month.
Originally published on CNBC.