Gold and silver prices rose again on Thursday, due to demand from investors and savers. The global market has become anxious, and they are seeking a safe-haven. Moreover, the United States Federal Reserve flooded the stock market with some bleak forecasts for the American economy.
Gold also received a slight rebound on Thursday morning after Jim Grant, the founder of Grant’s Interest Rate Observer, stated that gold and silver are the best current markets to invest in.
Jim Wyckoff, an analyst at Kitco News, wrote that global stock markets were mostly lower in overnight trading on Wednesday through Thursday. This was especially true in Asia. The US stock indices pointed to solidly more modest openings when the New York day session began.
Fed announces that the US economy could take years to recover
Risk aversion has returned to the market after a wake-up call issued by the Federal Reserve following its two-day FOMC meeting on Wednesday afternoon. The Federal Reserve made no changes to the United States’ monetary policy. However, it leaned in moderately, saying that it could take years for the economy of the United States to fully recover from the recent damage caused by the Covid-19 pandemic. The central bank also painted a bleak picture of the US economy’s current state, including the forecast for the GDP. The country’s GDP is likely to drop at 6.5% this year, and the unemployment rate will exceed 9%. Those numbers did not come as a shock to the market.
On the other hand, analysts agree that the Federal Reserve is committed to keeping interest rates close to zero until the end of 2022 and using all its tools to support the economy. It could translate into new speculative bets and boost the rebound in equities and corporate debt. However, without a real economic recovery, the market will have to face a more significant challenge. The disconnect between asset returns and economic fundamentals cannot last forever, and investors will need to be more rational with their investment approach.
There are also growing concerns in the global market about a second wave of the Covid-19 pandemic affecting many countries. There is some evidence that this may be occurring in some regions of some countries, including the United States.
The dollar has rebounded
Major foreign markets see the US dollar index rebound stronger after hitting a three-month low on Wednesday.
Wyckoff says that the dollar is passed out. Meanwhile, Nymex crude oil prices are lower in a corrective pullback after a three-month high above $40 on Monday and are trading at around $38.50 a barrel.
The yield on the benchmark 10-year United States Treasury bond is currently resting at around 0.7%.
Gold rose solidly Thursday morning, and the bulls are having a good week as safe-haven demand has returned to the market. The yellow metal is trading at $1,733 an ounce. Meanwhile, silver continues to struggle upward to reach $18. For now, it has settled at $17.76 an ounce.