Friday morning saw the precious metals finally rise as the impact of the Federal Reserve's decision to hike its benchmark interest rate continues to sink into the markets' psyche. Gold prices were about 0.3% higher at $1,132/oz at 10 am EST while spot silver was essentially flat at $16/oz.
Friday marks the colorfully named "Quadruple Witching," which occurs when the monthly expiry date for various options—stock index futures, stock index options, stock options, and individual stock futures—all fall on the same day. This situation occurs a handful of times each year. Traders must decide whether to close out their expiring positions or roll them over.
The confluence of these four options expiry dates typically engenders higher-than-usual volatility on the markets that day. Although U.S. stock indices were modestly in positive territory on Friday morning, the indices were bouncing up and down. Even after a hiccup following the FOMC rate hike on Wednesday, the Dow Jones index continued to eye the momentous 20,000 target. The 10-year Treasury yield continued its ascent to about 2.60%.
Some key economic data released on Friday included U.S. housing starts, a measure of new building permits being issued, fell almost 5% during November. This was considerably worse than experts had forecast and followed a nine-year high in the previous month. Similarly, construction on new homes tumbled last month, sliding 18.7% according to the Census Bureau. Nonetheless, homebuilder confidence was measured at its highest in 11 years. This gauge was somewhat balanced by higher borrowing costs due to rising interest rates on the one hand and hopes that a Trump administration will ease regulatory hurdles on the other hand.
One of the main reasons that gold and silver rebounded slightly on Friday was the dollar finally pulling back from its recent post-Fed rally. The DXY index was essentially flat on Friday morning at 103.0 after declining in overnight trading. This pause for the USD helped take some of the extra downward pressure off of the precious metals. The low levels for the metals also surely enticed some bargain-hunting among gold bulls.
However it's worth keeping in mind that if the markets become confident that the Fed will indeed follow through on its suggestion of three more rate hikes in 2017, the higher rates will undoubtedly weigh on the upside for gold and silver next year.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.