The Gold, Silver Rallies Could “Have Legs”

Stocks climbed higher today, with the Nasdaq Composite reaching new intraday highs and the Dow Jones Industrial Average striving to surpass the 40,000 level once again.

The S&P 500 gained 0.3%, and the Dow edged slightly above the flatline following the blue-chip index’s record close on Friday. The tech-heavy Nasdaq Composite rose about 0.6%, bolstered by Nvidia’s stock gains ahead of the chipmaker’s eagerly awaited earnings report on Wednesday.

Stocks have advanced as investors grow increasingly hopeful that the Federal Reserve will soon lower interest rates, despite cautionary statements from policymakers. All three major indices closed at record highs on Friday, driven by increased risk appetite and optimistic outlooks from Wall Street analysts.

Investors are grappling with whether this optimistic outlook is sustainable or if it’s getting ahead of the Fed’s trajectory. A crucial test comes on Wednesday with the release of minutes from the Fed’s May meeting, as reported by Yahoo Finance’s Josh Schafer.

Today, Fed Vice Chair Philip Jefferson and Fed Vice Chair of Supervision Michael Barr cited disappointing first-quarter inflation as a reason for maintaining current rates, allowing more time for restrictive policies to take effect.

The market is bracing for Nvidia’s highly anticipated quarterly results on Wednesday, which are seen as a key catalyst for the stock market rally. Expectations for the AI chipmaker’s earnings and revenue growth are exceptionally high at 400% and 240%, respectively, with the focus on whether it can once again meet or exceed the hype.

Simultaneously, rallies in commodity markets are stoking concerns about a potential increase in US inflation. Copper prices on the LME surpassed $11,000 a ton for the first time, reaching their highest-ever level as investors anticipate a looming supply shortage.

Gold prices trimmed gains today as traders took profits following a surge to a new record high. The rally was fueled by growing optimism over the Federal Reserve’s monetary policy and rising geopolitical tensions in the Middle East.

Earlier in the day, gold prices jumped as much as 1.4% to reach $2,450.07, surpassing the previous intraday high set in April. Despite easing off the high due to profit-taking, the outlook for gold remains positive.

Traders have been increasingly betting that the Fed may cut interest rates as early as September, which would benefit gold since it doesn’t pay interest. Additionally, a weaker dollar has provided extra support for the precious metal. Recent economic data suggest that the US economic recovery is slowing, which could lower inflation and reduce the need for prolonged tight monetary policy.

Broader macroeconomic factors are also influencing precious metals and other commodities like copper. Gold’s status as a safe-haven asset was in focus after news broke that Iran’s President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian were killed in a helicopter crash on Sunday. This incident, along with the ongoing Gaza war, has heightened geopolitical risks across the region, particularly after a China-bound oil tanker was hit by a Houthi missile in the Red Sea on Saturday.

Hedge funds trading Comex futures increased their bullish bets on gold to a three-week high in the week ending May 14, according to data from the Commodity Futures Trading Commission.

Gold prices have risen about 17% this year, with the recent strength attributed to central-bank purchases, strong demand from Asia, especially China, and elevated geopolitical tensions in Ukraine and the Middle East.

As of 10:13 a.m. in New York, spot gold was up 0.1% to $2,417.51 an ounce. Silver, which is also considered an industrial commodity due to its use in products like solar panels, was slightly higher after earlier climbing to its highest level since December 2012. Palladium rose, while platinum fell.

In short, the precious metals rally seems to be alive and well, making them particularly attractive as economic pressures converge on the broader equity and bond markets.


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