Waller’s Comments Reduce September Rate Hike Expectations, Supporting Precious Metals
Federal Reserve Governor Christopher Waller recently suggested he favors keeping interest rates unchanged if next week’s inflation data continue to show cooling trends. This statement swiftly shifted market expectations, dropping the probability of a September rate hike from 63.2% on Wednesday to approximately 50.4%. As US Treasury yields declined amid this shift, risk appetite improved, putting downward pressure on the US dollar. Consequently, spot gold and silver prices staged notable gains during Thursday afternoon trading. Spot gold surged nearly 2% to a peak of $1,511.70 per ounce, while spot silver climbed over 2%, reaching $21.60 per ounce.
US and European Equity Markets Gain on Improved Risk Sentiment
North American stock markets mirrored the risk-on sentiment, with the Nasdaq Composite rising 1.4%, the S&P 500 up 1.1%, and the Dow Jones Industrial Average gaining roughly 1.2%. European benchmarks also advanced, supported by the dovish Fed tone: the FTSE 100 increased by 0.7%, Germany’s DAX added 0.63%, France’s CAC 40 edged up 0.07%, and Italy’s FTSE MIB rose 0.88%. This coordinated rebound reflects growing market confidence amid easing expectations for further rate hikes.
Treasury Yields Fall, Gold Approaches Critical Resistance Levels
The 10-year US Treasury yield retreated to 4.77%, while the 2-year yield fell to 4.34%, easing pressure on interest-rate sensitive assets. Gold responded with a technical rebound, closing in on resistance in the $1,489.87 to $1,538.77 range. Should gold maintain levels above $1,490, it could aim for resistance near $1,532.67 or higher in the short term. Silver reclaimed key support above $21.26 but still faces resistance between $21.72 and $22.14.
Conflicting Economic Indicators Heighten Uncertainty Ahead of Jobs and Inflation Reports
Economic data released this week have presented mixed signals. August’s ISM Services Index increased from 54.1 to 55.4, while the prices paid component surged to 72.6—the highest since October 2022—indicating persistent price pressures. However, the employment index remains below growth territory at 47.8, underscoring ongoing labor market challenges. Investors now await Friday’s August nonfarm payrolls release and the September 11 Consumer Price Index (CPI) report, both pivotal in assessing the Fed’s monetary policy trajectory.
Geopolitical Tensions Limit Oil Price Gains, Affecting Inflation Expectations and Gold
On the geopolitical front, tensions in the Strait of Hormuz intensified after Iran launched retaliatory rockets targeting Kuwait following US military airstrikes. Despite heightened risks in this vital oil transit chokepoint, crude oil prices saw limited gains on Thursday, with WTI crude settling at $91.30 per barrel and Brent crude near $95.52. Oil’s sustained high levels maintain inflation pressures, thereby constraining gold’s upside that might otherwise stem from expectations of a Fed pause.
Technical Factors and Data Releases to Guide Gold and Silver Movements
Overall, the recent rebound in gold and silver primarily reflects short-term technical recovery driven by easing Treasury yields and dollar weakness rather than a definitive drop in inflation pressures. Upcoming nonfarm payroll and CPI data will be key to market direction. Strong employment and wage growth could reinforce the dollar and short-term Treasury yields, weighing on precious metals. Current technical support lies around $1,436 for gold and $20.26 for silver, with potential for continued volatility in the near term.
Traders and investors should monitor soon-to-be-released macroeconomic data closely, as these reports will heavily influence precious metals’ pricing and broader market sentiment going forward.