Gold and Silver Eye Weekly Losses Amid Rate Hike Concerns


In recent weeks, stronger-than-expected jobs data along with inflation news, have led many to believe that the Fed may pursue a more aggressive rate hike stance. This sentiment, along with subsequent dollar strength, pushed gold and silver lower for the second consecutive week, last Friday. Investor anticipation quickly shifted to this Tuesday’s CPI news, which would be followed by a bevy of Fed speaking events and economic data releases throughout this week. 

Gold edged 0.4% lower to $1,854 on Monday, while Treasury yields ticked higher ahead of Tuesday’s inflation update. Meanwhile, silver saw modest gains, but failed to breach the $22.00 mark. Stocks in the U.S. also gained on Monday, following last week’s severe declines. The tech-heavy Nasdaq Composite led Monday gains at 1.6%.

On Tuesday, data revealed that the U.S. consumer price index (CPI) rose by 6.4% on a year-over-year basis in January. The latest round of CPI data also showed that prices rose by 0.5% in January, which was the most significant increase in three months, and higher than the forecasted 0.4%. 

The dollar index neared two-week lows following the news, while silver languished below $22.00. Following the CPI news, gold rose to $1,870 for a 0.8% daily uptick, as some believed the higher inflation print lessened the likelihood of more severe rate hikes.

On Wednesday, news broke that retails sales surged by 3% in January, against forecasts that were closer to 1.9%. This marked the biggest increase in over 18 months and for some, upped the likelihood of a more aggressive Fed. Gold tumbled to one-month lows near $1,831 following the better-than-expected sales data, while silver ended the day near $21.44, which was nearly a 2% loss. 

Gold initially saw pressure on Thursday, following comments from several Fed officials that alluded to the possibility of a 50 basis-point rate hike at the next Fed Policy meeting in March. However, the yellow metal was able to pare losses, and bounce from 1-month lows near $1,826, as the dollar rally eventually cooled. 

Inflation concerns have pushed Treasury yields higher, which have also pressured gold to the downside. As of this morning, the yield on the 10-year Treasury note had reached its highest since November of 2022, while the 2-year Treasury yield hovered near 11-week highs around 4.626%. 

On the equities front, stocks slid lower this morning as the prospect of Fed hawkishness rattled Wall Street investors. Currently, all three major averages are on track for weekly losses, with the S&P 500 leading there, with what is currently a 1.2% weekly downturn. 

Precious metals were subdued this morning by rising Treasury yields and hawkish Fed speak. The dollar index had touched a five-week high of 104.65 this morning, which also weighed on precious metals. As this is written, gold is 1.2% lower for this week at $1,841 an ounce, while silver is eying a 0.9% weekly loss at $21.71. If maintained, this would be the third consecutive weekly loss for precious metals. 

This week, markets were reactive to economic news and Fed speak. The same could be true next week, as investors will anticipate Wednesday’s release of Fed minutes from the February 1st meeting, jobless claims, and Personal Consumption Expenditures (PCE) Index news on Friday.

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