Gold and Silver Diverge While Stocks Eye Record Gains
Last week, gold and silver managed to post weekly gains following cooler-than-expected inflation data, which subsequently bolstered bets that the Fed would cut interest rates in March of 2024. This week was shortened in terms of trading days, as major markets were closed on Monday for Christmas. Markets were relatively quiet throughout this week amid thin holiday trading, and a light schedule in terms of economic events.
Gold and silver started the trading week at $2,064 and $24.36, respectively, with gold seeing a modest uptick following Friday’s cooler PCE data. U.S. stocks were also slightly higher on Tuesday amid optimism surrounding Fed policy. Most notably, the S&P 500 closed near its all time high of 4,796.56.
U.S. equities saw more gains on Wednesday on thin trading volumes, and rate cut bets. At that point, the odds of a March 2024 Fed rate cut were near 80%, according to the CME’s FeWatch Tool. This sentiment pressured the dollar index to a 5-month low of 100.83, which was supportive of bullion. As a result, gold gained 0.9% for a closing price of $2,086.
The most significant event on this week’s calendar of economic events came on Thursday, via weekly jobless claims. On Thursday, the Labor Department reported that 218,000 Americans filed for unemployment benefits last week, when a number closer to 215,000 was forecasted by economists. Following this news, the benchmark 10-year Treasury yield and the dollar bounced from their respective lows. This caused gold to slip from a 3-week high, as the yellow metal ended Thursday’s trading 0.7% lower, at $2,071.
This morning, gold steadied near $2,066, which would be a modest weekly uptick, and a 13.2% yearly rise. This will mark gold’s most significant yearly gain since 2020. Silver is currently eying a weekly divergence from gold, at $23.89. If maintained, this would solidify a 1.9% weekly drop and 0.7% yearly downturn for silver.
Gold’s momentum throughout 2023 was largely attributable to factors such as geopolitical upheaval in the Middle East, dollar weakness, and a dovish shift in Fed policy. The latter has also contributed to significant tailwinds for U.S. stocks.
As this is written, all three major U.S. stock market averages are closing in on their ninth consecutive weekly uptick. The tech-heavy Nasdaq Composite is nearing its best year since 2003, with what is likely to be a 44.2% yearly gain. Meanwhile, the S&P 500 remains just below its all-time high and will likely see a 24.6% yearly rise. Currently, the S&P 500 is eyeing the least significant yearly gain of the three averages, at 13.4%.