This week’s events have had a dramatic impact on equities, gold, silver, and the dollar

There were three major events this week that had a profound impact on U.S. equities, gold, silver and the U.S. dollar. The first major event was a renewed optimism on the revision of a bipartisan proposal which was introduced last week. Another primary event that had a huge impact was the information from the Federal Reserve that was presented through this month’s FOMC statement and the following press conference by Chairman Powell immediately following the conclusion of the last FOMC meeting year. The third event that impacted the financial markets this week was the rollout of a Covid-19 vaccine that had just been granted emergency use authorization by the FDA.

The rollout which began on Monday of Pfizer’s Covid-19 vaccine created investor optimism that there was light at the end of the tunnel. This had the net effect of moving the U.S. equities markets higher with all three major indices trading and closing at the highest weekly value on record.

The second primary event that influenced the financial markets was when the bipartisan group which proposed a revision of a fiscal aid package that they adjusted this week breaking the proposed $908 billion expenditure that was contained in a single bill into two separate bills. The first bill allotted approximately $748 billion and covered areas that both the House and Senate had come to an agreement upon making this smaller fiscal aid bill much more palatable to both Democrats and Republicans.

This meant it that the $748 billion aid proposal now had a much higher probability that it could be passed and implemented prior to the end of the year. The second bill allotted for $160 billion in fiscal aid and contained the two primary issues that had led to a stalemate between the political factions. Primarily this second half allocated funds for state and municipal aid and liability insurance for businesses giving them protection against Covid-19 related lawsuits.

However, it seems that nothing is a done deal in terms of a guarantee that this proposal will pass, as real concerns began to surface on Thursday as to whether or not the Senate and House could successfully vote this proposal into law.

The last event was this week’s FOMC meeting, which was the last time the Federal Reserve will meet this year. There were very few changes made to the statement released last month when compared to the statement released this week. In essence it said that the Fed intends to stay the course and continue its current monetary policy which is highly accommodative keeping interest rates near zero at least until the beginning of 2023. However, it was during the press conference held by Chairman Powell that underscored the Fed’s commitment to maintaining its current trajectory which had a dramatic impact taking the U.S. dollar lower throughout the week.

Collectively these three events were highly supportive of both gold and silver pricing moving both precious metals to higher ground. From the opening bell on Monday until the close of trading on Thursday market participants watched both gold and silver trade higher than the previous day. Although today both precious metals traded fractionally lower, the declines were insignificant when compared to the weekly gains.

Next week will be a pivotal week because the outcome of the current negotiations on the bipartisan proposal will run out of time if not completed. The fallout and detrimental effects if this legislation does not pass will affect roughly 12 million unemployed Americans, and an equal number of Americans who have remained in their homes due to the moratorium eviction. The extended unemployment benefits will expire the day after Christmas, and the eviction moratorium will end on December 31^st.

It is for that reason that we remain cautiously optimistic that legislation will be voted upon and implemented prior to the end of the year. This can only occur if the legislation is voted upon and passed next week.

Wishing you as always, good trading and good health,