Metals Minute 132: Markets Lower Metals Higher
Last week’s 8-minute speech by Federal Reserve Chairman Jerome Powell effectively removed $2 Trillion from global stock markets at a rate of $4.2 Billion per second. Today the market rout appears prepared to continue, with futures down across the board. The DOW is down 3%, S&P off 4%, and the tech-heavy NASDAQ index down 5% since Friday’s speech.
While the metals were initially caught in the downdraft (as usual), the effects have been far less dramatic, and they already appear to be moving higher. Even volatile silver is down only 1.3% since the speech, and palladium is already 6% higher. The metals composite is also up since Friday vs. down for stocks.
Keep in mind that the vortex on Wall Street was triggered by the notion that interest rates will likely be raised further this year in an effort to slow economic demands and reduce inflation. Meanwhile, real interest rates are still negative compared to the rate of inflation.
For the time being, the Federal Reserve appears to be willing to sacrifice financial markets to reduce inflation in the overall economy. In the face of this, the metals add strength.