The ISM Services PMI has shown a slight increase, rising to 52.6 and modestly exceeding market expectations. This change indicates ongoing expansion in the services sector, which is notable as it constitutes the largest segment of the U.S. economy.
As the economic landscape evolves, market participants are increasingly anticipating a shift in monetary policy. Current projections suggest an 89% likelihood of a 25-basis-point interest rate cut at the upcoming Federal Open Market Committee (FOMC) meeting, a notable increase from the 71% probability observed just a week ago. Typically, lower interest rates enhance the appeal of precious metals by reducing the opportunity cost associated with holding assets that do not yield interest. Nevertheless, investor sentiment remains cautious as many await further economic data. A London-based metals strategist noted that while traders are gearing up for a dovish pivot from the Federal Reserve, the central bank has retained flexibility to respond to any unexpected inflationary pressures.
In focus is the September PCE inflation report, which has been delayed due to disruptions in government data collection. Set to be released Friday, this report is being viewed as crucial for shaping short-term monetary policy expectations.
Additionally, today’s Weekly Initial Jobless Claims could provide further insight into the current state of the labor market. Economists are predicting only a slight increase in claims; however, any unexpected fluctuations could lead to temporary disruptions in precious metals markets.
Silver has recently outperformed gold, buoyed by strong industrial demand and tighter supply conditions. Yet, analysts caution that potential slowdowns in the U.S. or European economies could dampen physical demand for silver, despite the supportive effects of anticipated monetary easing. As such, market participants remain vigilant, balancing the interplay between economic indicators and the broader implications for precious metals.
