by | Oct 4, 2023 | Newsletters, Precious Metals

Last Updated: December 6, 2023

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As interest rates climb, public debts mount, and recession fears loom, there is, fortunately, some positive news for investors this October. 

The alternative asset market has seen some interesting price movements over the past four weeks. Perhaps the most noticeable are Bitcoin and Ethereum, which both ended the month of September in the green. 

The world’s top cryptocurrency gained about 5.5% in September, while Ethereum, the second-largest token by trading volume, saw a more modest 1.2% uptick. All the while, the U.S. stock market, as measured by the S&P 500 index, declined by 6.1% over the same period. 

On the other hand, both silver and gold saw a negative 30-day price movement, with the yellow metal declining by about 6% and silver falling by roughly 10%. Currently, gold sits at a six-month low and is about 9% below its 52-week high set on May 4 ($2,048). 

 

Market Snapshot: October 3, 2023

  • Inflation Rate: 3.7%
  • Fed Rate: 5.25% to 5.5%
  • Gold Price: US$1,825/oz.
  • Silver Price: $21.12/oz.
  • Bitcoin Price: US$27,347
  • Ethereum Price: US$1,649

 

The cryptocurrency market has shown considerable resilience amid a stock sell-off and worrying macro-level economic indicators, including signaling from the Fed of another interest rate hike before year-end. At the same time, the precious metals market has receded into deeply discounted territory. 

Perhaps the most compelling explanation for the gold and silver dips in September is the relative strength of the U.S. dollar. Despite mounting concerns related to the serviceability of the U.S. national debt in a rising interest rate environment, the U.S. dollar continues to trade favorably against the euro and the Japanese yen. After bottoming out in 2021, generationally high U.S. Treasury yields have made U.S. dollars an attractive buy for outside investors.

Despite a worrying inflationary environment, public confidence in U.S. policymakers’ ability to keep real interest rates positive remains high. As long as this status quo continues, the Federal Reserve Bank of Chicago foresees depressed demand for the yellow metal. 

However, as history has shown, consumer confidence can turn at the drop of a dime. 

In October, the first student loan repayments since 2020 are due for repayment. And only last month the Federal Open Market Committee announced their interest in yet another rate hike before January. With more and more American families struggling to make ends meet, we may soon witness a sea change in investor confidence. 

While it’s too soon to tell whether a recession is imminent, there are worrying signs out of Washington. Fortunately, however, alternative assets may provide some degree of portfolio insurance in the case that tides turn for the worse. 

Speak to your financial advisor today about diversifying your portfolio with precious metals or cryptocurrencies—allocating a small portion of your holdings to alternative assets may provide the protection you need to preserve your wealth during the next economic downturn.

Liam Hunt

Liam Hunt, M.A., is a financial writer covering global markets, monetary policy, retirement savings, and millennial investing. His commentary and analysis have been featured in the New York Post, Reader's Digest, Fox Business, and Forbes.