Gauging the Influence of the New Fed Chair Selection on Precious Metals
A good day for precious metals
Gold had an up day on Wednesday, November 1, as markets reacted to the selection of the next Federal Reserve chair. Gold futures for December delivery were 0.5% higher and ended the day at $1,276.5 per ounce.
Silver rose 1.4% to close Wednesday at $16.9, while platinum rose 1.3% and closed at $927.3 per ounce. Meanwhile, palladium, which has seen a whopping YTD (year-to-date) gain of ~42%, rose 1.3% and closed at $992.5 per ounce.
Interested in AEM? Don't miss the next report.
Receive e-mail alerts for new research on AEM
The strength in precious metals was mostly due to the choice of Jerome Powell as the next Fed chair. Powell is expected to be less hawkish his challenger, John Taylor, a Stanford University economist. The selection of the chair is widely expected to influence the pace of interest rate hikes, which play on precious metals.
Precious metals are not yield-paying assets, and any hike in interest rates usually causes investors to move away from gold and silver to US Treasuries, causing precious metal demand to drop, followed by price declines.
Investors’ eyes will thus be glued to the next two FOMC (Federal Open Market Committee) meetings over the next month and a half. These meetings could keep gold rangebound because more dovishness is expected.
Among the significant funds that also rose on Wednesday are the iShares Silver Trust (SLV) and the SPDR Gold Shares (GLD), which climbed 2.5% and 0.36%, respectively, and have seen YTD gains of 7.1% and 10.5%, respectively. Agnico-Eagle Mines (AEM) and Yamana Gold (AUY) fell 0.83% and 1.5%, respectively, while AngloGold Ashanti (AU) and Iamgold (IAG) rose 0.97% and 0.73%, respectively, on November 1.