Market Update January 30 – Gold Rises After Drone Strike

Despite gold and silver facing pressure from a strengthening USD dollar (the DXY is back over 103) and a surging US stock market (trading near all-time highs), metal investors have reason to remain optimistic on two fronts:

1) Geopolitical tensions in the Middle East are rising again following the Iranian-backed drone attack that killed 3 US soldiers and injured 25 others this past weekend. President Biden is under pressure to launch a significant retaliation, while Tehran preaches diplomacy. Both gold and silver rallied on the news, with gold surpassing $2035/oz and silver reaching $23/oz.

2) The FOMC meeting this week should provide clarity on the Fed's plan regarding future interest rate cuts. Despite a resilient US economy, inflation has fallen sharply, setting the stage for a potential interest rate cut as early as March. The market is divided on the possibility of a March cut, with 50% of participants expecting a rate cut and 50% expecting interest rates to remain at their current levels. Historically, there is an average of 8 months between the last Fed rate hike and the first rate cut. The last hike was in July 2023, exactly 8 months ahead of March 2024. A rate cut would be bullish for gold and silver. 

It's worth noting that premiums on physical gold and silver products have dropped significantly in the past month, reaching pre-Covid lows. Lower product premiums mean investors can buy their favorite gold and silver bars and coins at better value. 

Follow Mark on Twitter @YaxleyYax

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Mark Yaxley, CEO of Strategic Wealth Preservation (SWP), began his journey in precious metals with Kitco Metals in 2006. Co-founding SWP in 2014, he now guides individual and commercial clients towards their investment goals. Renowned for his 'Inside the Vault' YouTube series, Mark has helped millions gain insights into gold and silver bullion ownership.