Reversals in many markets while gold remained resilient

This week the Federal Reserve addressed revisions to its current monetary policy as it attempts to bring current inflation levels down to an acceptable target. The statement issued after the FOMC meeting, coupled with Chairman Powell’s press conference, resulted in extreme volatility in many financial sectors.

Market participants witnessed one of the strongest knee-jerk reactions and a complete reversal of market sentiment for 24 hours. The initial market sentiment was extremely short-lived as it was followed by a complete reversal from the initial reaction the following trading day.

The release of the FOMC statement from the Federal Reserve, coupled with Chairman Powell’s press conference, resulted in a significant rally in US equities. The Standard & Poor’s 500 gained nearly 3%, the biggest daily gain in two years. Stocks across the board saw the best Fed day performance since 2011. It hit gold significantly, sending the yellow precious metal higher. At the same time, the dollar fell significantly, losing almost 1%, and US Treasury yields also fell significantly.

Yesterday, market participants had 24 hours to digest the information presented by the Federal Reserve through the May FOMC statement and Chairman Powell’s comments during the press conference. This resulted in a 180° reversal of Wednesday’s reaction. US stocks fell sharply, falling more than Wednesday’s gains. The S&P 500, which gained nearly 3% on Wednesday, fell 3.56% on Thursday. On Wednesday, 95% of the stocks contained in that index had daily gains. However, on Thursday, more than 95% of the stocks included in the index experienced sharp declines.

Extreme price volatility was also evident in the US dollar and US Treasury bonds and bonds. The dollar index saw a significant drop of just under 1% on Wednesday, followed by gains of 0.96%. Yesterday. Investors also witnessed sharp declines in US Treasury yields on Wednesday, followed by a full 180° reversal yesterday. Yesterday, 10-year Treasury Note yields advanced to 3.043%, and 30-year Treasury bonds gained 17 basis points to yield 3.176%.

However, it was gold that appeared to have price stability, resulting in three consecutive days of higher prices. As of 6pm EDT, based on gold futures, the most active June 2021 contract is currently up $7.10 or 0.38% and is pegged at $1882.80. This was certainly a week that will be remembered for quite some time, considering the significant price reversals on Wednesday and Thursday.

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Wishing you good business as always,



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has gone to great lengths to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange of commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage arising from the use of this publication.

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