Gold and Silver Eye Fourth Week of Losses as Inflation Persists
Last week, gold and silver saw their third consecutive week of declines amid fears of Fed hawkishness and dollar strength. Throughout this week, precious metals prices were once again driven by economic data and Fed speak regarding interest rates.
On Monday, gold was languishing near a 5-week low of $1,836 as rate hike expectations lent support to the dollar index. However, geopolitical tensions and safe-haven demand provided momentum for gold and silver. Silver gained 0.88% with a closing price of $21.79, while gold ended the day near $1,842. Meanwhile, stock and bond markets in the U.S. were closed on Monday, in observance of Presidents Day.
On Tuesday, data from the National Association of Realtors revealed the 12th consecutive monthly drop in existing home sales, which marked the longest losing streak in over 20 years. Discouraging economic news along with rate hike fears drove U.S. equities lower on Tuesday, while Treasury yields jumped back to three-month highs. Gold and silver saw little change on Tuesday, ending trading near $1,835 and $21.85, respectively.
Gold fell on Wednesday, as minutes from the Fed’s most recent policy meeting showed that policymakers were in favor of continued rate hikes in order to combat inflation. The meeting minutes revealed that Fed officials generally favored a 0.25% rate hike at the next policy meeting in March. This sentiment pushed Treasury yields and the dollar higher, which would pressure gold to the downside.
Ultimately gold would fall by 1.2% to $1,823 an ounce on Wednesday, while silver dipped 1.6% lower. Wall Street investors digested the Fed minutes, and exercised caution. Fears of higher interest rates and economic slowdowns once again drove stocks lower, with major indices such as the S&P 500 notching 4 straight days of losses.
Post Fed minutes, investor attention quickly shifted to Thursday’s revised GDP data, which showed that the U.S. economy grew at a slower rate than originally reported, of 2.7%. Despite this, U.S. equities managed to snap their losing streak. Gold and silver were little changed on Thursday, as investors awaited Friday’s inflation news.
On Friday, the personal expenditures index (PCE), showed a 0.6% increase in prices for in goods and services in January, which was higher than forecasts of 0.5%, and the biggest monthly jump in prices in over six months.
The higher inflation number only boosted the odds of a more hawkish Fed, which weighed on precious metals, and preceded a sharp fall for stocks this morning. Meanwhile, the yield on the 2-year Treasury note reached its highest level in over 15 years, while the dollar index touched a fresh 7-week high of 104.936.
Rattled by inflation and rate hike concerns, U.S. equities are on track for a losing week, as the S&P 500 and Dow Jones Industrial Average are both nearly 2.6% lower. The tech-heavy Nasdaq may lose the most of the major averages, with what is currently a 3.4% weekly dip.
As this is written, gold is hovering at $1,810 an ounce, which is 1.5% lower for this week. Silver is 3.6% lower for the week, at $20.82 an ounce. Despite safe-haven inflows from concerned investors, dollar strength and higher yields will push gold and silver to their fourth consecutive week of losses.