Did The Fed Just Clear The Way For Commodity Prices To Continue Their Upward Surge?

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Published: Nov 6, 2023, 18:34 UTC

A long list of the world’s most powerful Wall Street banks have described the current economic climate as “The Golden Age of Trading”.

Softening Labor Market: Good News for Commodity Prices

Sometimes “bad news” is “good news”. That seemed to be the case on Friday when the closely watched U.S jobs report came in weaker than expected. That, combined with the Fed’s continuing rate “pause” on Wednesday ignited a rally, sending Commodity prices across the board surging back towards recent highs.

Last week, Fed Chair Jerome Powell hinted the U.S central bank is now finished with its most aggressive tightening cycle in four decades after it held off on raising interest rates for a second consecutive policy meeting.

Those odds increased after Fridays U.S employment report revealed that the labour market is finally cooling.

U.S Nonfarm payrolls increased 150,000 in October – less than forecast and barely half of September’s revised figure of 297,000. Meanwhile the unemployment rate climbed to a two-year high of 3.9% – indicating that employers’ strong demand for workers is beginning to slow.

Labour market numbers are always the last thing to turn in an economic cycle – so the softening in employment and the rise in the unemployment rate makes it all the more likely that the Federal Reserve won’t hike interest rates again.

Traders Eagerly Await FOMC Officials’ Speeches for Clues on Fed’s Plans

With a host of FOMC officials including Jerome Powell due to speak over the next few days – traders will be scrutinizing every word for fresh clues into the central banks future monetary policy plans and most importantly, confirmation that the Fed is finally done hiking.

One of the biggest beneficiaries of the current macroeconomic backdrop has undoubtedly been Gold. The precious metal rocketed above $2,000 an ounce within minutes of the U.S employment figures being released and closed out the week only 4% away from its 2020 all-time highs.

Gold prices have been on an unstoppable run, rallying from near the $1,800 level at the beginning of October to a six-month high of $2,000 an ounce – not once, not twice, but on multiple occasions over the past month.

The bullish momentum also split over into other Commodities with Silver, Platinum, Uranium, Sugar, Coffee, Cocoa and Orange Juice prices soaring to fresh multi-month and multi-year highs.

The big question now is did the Fed just clear the way for Commodity prices to continue their upward surge?

Only time will tell, however one thing we do know for certain is that it won’t take much for Commodity prices to move significantly higher in this current macro-environment and breach new record highs in the coming weeks and months ahead.