On May 3, 2023, the Federal Reserve increased the federal funds rate by a quarter-point, causing a surge in precious metals such as gold and silver. Gold experienced a 1.18% increase in value against the U.S. dollar, currently trading at $2,057 per unit. The value of silver also increased by 0.87% against the greenback, with a 6% increase in the past 30 days and a 31.5% rise over six months.
Jerome Powell, the chair of the Federal Reserve, emphasized the central bank’s commitment to reducing inflation and reducing the risks of slowing down economic activity too much. The Fed will assess the extent to which additional policy firming may be appropriate, meeting by meeting while balancing the risk of not getting inflation under control and slowing down economic activity.
Global data from Google Trends indicates that the search term “how to buy gold” reached a perfect score of 100 on May 3, according to 24-hour statistics. Meanwhile, precious metals trended on Twitter and generated numerous discussions and tweets.
Not only did gold experience a surge in value, but crypto assets, too, saw a rise, with bitcoin surpassing the $29K per unit range and ethereum reaching over $1,900 per unit. Both leading crypto assets saw gains ranging from 1.3% to 1.8% against the greenback.
However, there was also a significant drop in crude oil prices on May 3, with West Texas Intermediate (WTI), Brent Blend, Nymex crude, Dubai Crude, and the OPEC Reference Basket all recording losses during the day’s trading sessions. This decline in crude prices follows Saudi Arabia and OPEC’s decision to cut back on production earlier this week.
Gold, in particular, has been on an upward trajectory, having risen 3.4% in the past month and over 25% in the last six months. The metal’s surge is likely due to concerns about inflation and the weakening of the U.S. dollar against other currencies.
Investors view gold as a safe-haven asset during times of economic uncertainty, as it retains its value even in volatile market conditions. The rising demand for gold can also be attributed to the global central banks’ purchase of the yellow metal.
Moreover, the rise in value of bitcoin and Ethereum reaffirms the growing popularity and usability of digital currencies. Investors view crypto assets as a viable alternative to traditional investment options, such as stocks and bonds. The decentralized nature of blockchain technology offers a level of security and transparency that traditional investment options may not be able to provide.
In conclusion, the surge in gold, silver, and crypto prices reflects the growing concern about inflation and uncertainty in the global economy. The Federal Reserve’s decision to increase the federal funds rate has caused a ripple effect across various markets, causing a shift in investors’ preferences. The rise in precious metals and crypto assets’ value highlights their importance as alternative investment options in times of uncertainty.
