Gold and Silver End Losing Streak Despite Higher Yields and a Hawkish Fed
It was a shortened trading week with major markets in the U.S. closed on Monday, in observance of the Labor Day Holiday. Like in previous weeks, investor sentiment was largely driven by Fed speak, and economic data releases throughout the week.
On Tuesday some positive news came from the services sector, from which the Institute for Supply Management reported a second consecutive monthly increase business services, when a decline was expected.
For many, the positive data increased the likelihood of more severe Fed rate hikes. Following the news, stocks in the U.S. fell, while the dollar index notched a fresh 20-year high. This, along with higher Treasury yields pushed gold down by 1.4% to its weekly low of $1,691. At the same time, silver found its weekly low at $17.93.
On Wednesday, the Fed’s Beige Book was released. This is a regular survey compiled from Fed officials throughout the country. Anecdotes from the Beige Book noted that the U.S. economy is likely to remain generally weak throughout 2022. The survey acknowledged that higher consumer prices would continue to plague growth, but there are signs that inflation in the U.S. has peaked.
Following this and speeches by other Fed officials, stocks surged higher with major averages ending multi-day losing streaks. Most notably, the tech-heavy Nasdaq rose by over 2%. Gold rallied by 1.3% on Wednesday, while silver closed at $18.48, for a 3.1% gain. Both metals are enjoying safe-haven demand but remain pressured by dollar strength and higher Treasury yields.
U.S. equities whipsawed between gains and losses on Thursday while Fed Chair Jerome Powell made remarks at the Cato Institute, in which he cautioned against prematurely loosening monetary policy. By the end of trading, major indices had all posted slight gains.
While stocks were surging this morning, Bitcoin also jumped by nearly 9%, on its way past the $21,000 mark. Gold has also capitalized on a slow down in the dollar rally by jumping 0.5%, touching $1,728 an ounce. Currently, the yellow metal is 0.9% higher for the week which if maintained, would end gold’s three-week losing streak. Silver is currently 4.1% higher on the week at $18.79 an ounce.