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Wall Street Slides Over Tight Job Market

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Reading time: 3 min.

U.S. private payrolls increased more than expected, dollar gains, precious metals drop

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Major Wall Street indexes are seeing steep declines on Thursday as new indications of a tight job market and hawkish remarks from policymakers fuelled worries that interest rates would remain high for longer than anticipated.

Most of the large technology and growth-oriented equities, including Alphabet Inc (GOOGL.O) and Microsoft Corp (MSFT.O), decreased by more than 1% as U.S. Treasury rates increased due to persistent expectations of rate hikes.

The sales of Tesla Inc’s (TSLA.O) electric vehicles built in China plummeted to a five-month low in December, while Amazon.com Inc (AMZN.O), which revealed greater layoff plans, erased premarket gains.

While growth falters some investors have been turning to precious metals as a safe haven trade. According to Heraeus, the largest precious metals dealer in the world, the prolonged conflict in Ukraine, persistently high inflation, and worries about a recession will be key factors affecting the markets for gold, silver, and platinum metals in 2023.

Despite multi-decade-high inflation over the past year, prices of gold and silver have not increased due to the continued strength of the US dollar as the Federal Reserve aggressively raises interest rates.

Given the likelihood of ongoing interest rate hikes, the dollar’s strength might last into 2023, perhaps deterring more investors from precious metals. However, according to Heraeus, a faltering economy might force the Fed to change direction, which would weaken the currency and perhaps boost gold and silver prices.

Heraeus forecasts that gold might reach a record high in euro terms if the US central bank maintains or even lowers interest rates.

Heraeus forecasts that in 2023, gold would likely trade between $1,620 and $1,920 per ounce and silver will likely trade between $17 and $25 per ounce, depending on the path that the dollar takes as a result of the Fed’s policies.

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