Gold and Silver Diverge as Inflation Persists
Last week, gold managed to reach a fresh all-time high of $2,198 and notched its best weekly performance in five months. Both gold and silver found support last week, in strong U.S. employment data which bolstered the odds of interest rate cuts. This week, markets were largely driven by inflation news, and subsequent monetary policy bets.
Gold and silver started the week at $2,180 and $24.29, respectively. The pair saw little movement on Monday, as investors braced for Tuesday’s inflation data. On Tuesday, news broke that the Consumer Price Index rose by 3.2% year-over-year in February, against forecasts calling for a 3.1% uptick. According to the Bureau of Labor Statistics, core inflation which excludes food and energy prices, jumped by 0.4% on the month, which was hotter than the predicted reading of 0.3%.
Despite Tuesday’s inflation news, stocks in the U.S. rose, while Treasury yields also surged higher. Most notably, the S&P 500 rose by 1.2% to a new record close. Meanwhile, gold ended Tuesday’s trading 0.8% lower at $2,158, while silver dipped by 1.4%, to a closing price of $24.08.
By Wednesday, markets had seemingly shrugged off the higher-than-expected inflation data, as the odds of a June interest rate cut were still near 70%, according to the CME FedWatch Tool. As a result, gold pared some losses from the previous session, and would end the trading day at $2,170. U.S. equities were mostly flat on Wednesday, as investors braced for another round of inflation data set for release on Thursday.
On Thursday, wholesale inflation data via the Producer Price Index, revealed that wholesale prices rose by 0.6% in February, when economists had forecasted a 0.3% rise. This marked the largest jump in wholesale prices since August of last year, and lessened the odds of a June rate cut. Subsequently, the 10 and 30-year Treasury yields saw their most significant single-day rises in over a month. These developments pressured gold to the downside, as the yellow metal ended the day near $2,164 an ounce.
As this is written, gold is hovering near $2,159, which would be a 0.9% weekly drop and an end to the yellow metal’s three-week winning streak. Silver managed to attract buyers, and at the time of writing, is near a year-to-date high of $25.37. This would mark a weekly divergence from gold, and a 3.9% weekly increase.
Stocks retreated this morning, as this week’s inflation news weighed heavily on Wall Street sentiment. Despite having reached a record close earlier in the week, the S&P 500 is eyeing a 0.12% weekly downturn, while the Nasdaq Composite and Dow Jones Industrial Average are closing in on 0.77% and 0.11% respective weekly losses.