Coming off one of their worst monthly performances of the year, precious metals rebounded in October to finish in the green. Gold had one of its least volatile months of 2021 but still gained 1.5%. Silver, which plunged at the end of September, added nearly $2.00 in October to finish up 8.5%. Platinum rose 5.7% to retake the $1,000 threshold and palladium gained 3.9% to close at $1,990.30, unable to maintain the $2,000 level which it spent most of the month above.
Metals benefitted from ongoing inflation data suggesting the scope and duration of rising prices is much larger than the Fed initially indicated. CPI data showed prices rose 0.4% in October and jumped 5.4% year-over-year which was higher than analysts predicted. Ongoing supply chain issues across virtually all business sectors and surging wage inflation as workforce participation declines and unfilled positions rise suggest, even if the causes are transitory in nature, rising prices are here for the foreseeable future. This led Fed Chair Jerome Powell to double down on the Fed’s commitment to begin tapering by the end of 2021. Metals jumped as the Fed changed its tune as to the nature of current price increases and emphasized that it will being tapering its asset purchases in 2021.
Equities had a stellar month to close at record highs across the board. Better than expected earnings led the rally as more than 80% of S&P 500 companies that reported earnings beat expectations. The Dow finished the month up 5.8% while the S&P 500 and Nasdaq jumped 6.9% and 7.3% respectively, their best performances in 11 months. The effects of supply chain disruptions and a diminishing workforce in the US became more apparent in October and shifted the current mindset regarding inflation. Unlike previous months where investors seemed to be wondering how much longer prices will remain high before returning to normal, October left many wondering how much worse inflation will be next month, and the month after.