Gold hits another all-time high on lower interest rates

Gold continues to glitter thanks to sharply declining bond yields, notably a major downward move in the real rate on 10-year TIPS. Other than for a 2% rally in the Russell 2,000, US equities were unchanged. The dollar lost another 1% today, making a 10% decline from its late 2022 high point.

TODAY’S MAJOR NEWS

Fed holds rates now, promises cuts next year

Wall Street traders read this as ‘rate hikes are over’, and Powell stated that the committee believes that we are at or close to interest rate peak. The Fed made no changes to interest rates or its accompanying policy statement, stating that “growth of economic activity has slowed from its strong pace of the third quarter,” versus previous wording of “economic activity expanded at a strong pace in the third quarter.” The Fed will continue to shrink its balance sheet by $1.14 trillion per year, and its negative impact should not be overlooked.

The Fed expects us to get down to the 2% inflation mandate in 2026, and to do so with unemployment having a “four” handle instead of a “five” handle. It is trying to walk a very fine line that has little if any margin for error. It changed it statement on inflation, now saying that “(it) has eased over the past year but remains elevated.”

The Fed’s infamous dot plot graphic now calls for three rate cuts in 2024, followed by 4 more the following year. That graphic better represents the thinking of individual members more than the statement itself would suggest. It should also be noted that the dot plot graphics have been about as wrong as the market has been over the past couple of years, but that’s a discussion for another day.

Retail sales continue to be surprisingly strong

Today’s US retail sales numbers combine with last month’s jobs report to show a stronger economy than expected. Retail sales increased 4.1% year-on-year in November, the strongest annual growth since February, following a downwardly revised 2.2% gain in October.

Retail sales rose 0.3% month-on-month in November, ahead of the expected 0.1% decline, and 0.2% decline in October
Retail sales minus vehicles rose 0.2% month-on-month in November, ahead of the expected 0.1% decline, after being flat last month
Retail sales minus vehicles and gas rose 0.6% month-on-month in November, ahead of the expected 0.1% rise, after being up 0.1% last month

exceeding analyst expectations that they would remain at the 0.1% gains posted the previous month.

Labor market remains robust

Unemployment claims data also showed a relatively healthy economy with a tight labor market.

First time claims for unemployment benefits fell to 202,000 in the week ending December 9, less than the expected 223,000, but down from 221,000 the previous week
The four-week moving average fell to 213,250 claims, down from 221,000 the previous week
Continuing claims for the week ending December 2 increased 20,000 to 1.876 million, and the four-week moving average rose modestly to 1.874million

TODAY’S MAJOR MARKETS

Russell 2000 continues rally

The Dow Jones, S&P 500, and NASDAQ were largely unchanged after yesterday’s rally, with the more cyclical Russell 2000 up another 2.0%
The Nikkei 225 fell again, off 0.7% overnight, continuing recent weakness, while the FTSE 100 was up 1.3% and the DAX was unchanged
The VIX, Wall Street’s fear index, rose marginally to 12.5

TIPS yields fall sharply, Dollar weakens

10-year TIPS index-linked yields saw another unprecedented 30 basis point fall in yield, to 1.71%
2- and 10-year yields were lower, at 4.39% and 3.94% respectively
The dollar index fell 1.0% to 102.0
Versus the dollar, the Euro and Sterling rose 1.1%, while the Yen was up 0.5%

Gold hits new highs, oil recovery continues

Oil prices rallied rose 3.1% to $71.7 per barrel, continuing its recovery
Gold prices hit another all-time high of $2,048 per ounce, up 2.5%, while Silver prices rose 6.4% to $24.4 per ounce
The grain and oilseed sector was modestly higher
Argentina reopened its export registry now that the new administration has changed its currency and tax policy, with significant new sales on the first day of the new policy.

Analysis by Arlan Suderman, Chief Commodities Economist: Arlan.Suderman@stonex.com

Market outlook by Paul Walton, Financial Writer: Paul.Walton@StoneX.com

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

StoneX Europe Limited is registered with the German Federal Financial Supervisory Authority (BaFin). BaFin registration ID: 10160255

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

The statistical data and the awards received refer to the Global FOREX.com brand.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

Additionally, StoneX Europe Ltd is allowed to provide Investment and Ancillary Services to the following non-EU jurisdiction: Switzerland.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

Tied Agent Information: KQ Markets Europe Ltd with Company No. HE427857.
Address: Athalassas 62, Mezzanine, Strovolos, Nicosia Cyprus.
Services Provided: Reception and Transmission of Orders.
Commencement Date: 06/12/2022
Website: KQ Markets - CFD Trading | KQ Markets

We may pay inducements, such as commissions or fees, to affiliates or third-party introducers for referring clients to us. This is in line with regulatory guidelines and fully disclosed where applicable.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.