Gold and Silver Face Their Third Weekly Loss Amid Dollar Gains and Fed Speak
Last week, gold and silver saw their second consecutive weekly dip as dollar gains and hawkish Fed rhetoric pressured the pair to the downside. This week, investors were focused on debt ceiling negotiations, Fed meeting minutes, and economic data.
Gold started the week at $1,976 and inched lower on Monday, as the dollar saw modest gains. Stocks in the U.S. were mixed on Monday as traders focused on debt ceiling talks, which seemed to yield little-to-no progress.
Debt ceiling concerns drove caution again on Tuesday, U.S. stocks declined. The Nasdaq Composite had shed the most by Tuesday’s close, at 1.3%. While gold saw an initial dip Tuesday, the yellow metal managed to pare its losses, and would end trading near $1,977, as Treasury yields and the dollar fell.
On Wednesday, the Federal Reserve released minutes from the May 2-3 policy meeting, which showed there was some conflict among Fed officials on whether or not to raise rates again in June. While members who advocated for an additional rate hike in June cited concerns over sticky inflation, other Fed officials were concerned that additional rate hikes may weigh too heavily on the U.S. economy. Currently, markets are pricing in a 67% chance that rates remain unchanged in June.
Stocks fell after the Fed’s meeting minutes were released, with the Dow posting its fourth consecutive day of losses. On the same day, gold touched its weekly peak of $1,983, as debt ceiling woes drove safe-haven inflows. However, safe-haven buying eventually favored the dollar, pushing the greenback to a two-month high on Wednesday. This pushed gold to $1,957 an ounce, and a daily loss of 1.3%. Silver was at $23.20 by Wednesday’s close, which was 2.2% lower for the week.
On Thursday, it was rumored that President Biden and U.S. Congressional leaders had made progress on debt ceiling talks. This spurred optimism on Wall Street and dented gold’s safe-haven appeal. Weekly jobless claims were released on the same day and showed an unexpected decline to 229,000 against expectations of 245,000. The positive employment news bolstered hawkish Fed bets, and subsequently pressured gold.
By the end of trading on Thursday, gold was languishing at a two-month low of $1,938, while the dollar index had reached a two-month high of 104.31. U.S. equities also rose on Thursday, amid debt ceiling optimism and a jump in tech stocks.
At the time of writing, U.S. stocks are on track for a mixed week, with the S&P 500 and Nasdaq Composite up 0.30% and 2.42% respectively. Meanwhile, the Dow Jones Industrial Average is on track for a 1.1% weekly downturn.
This morning, data showed that the core personal consumption expenditures index rose by 0.4% in April, against expectations of 0.3%. Persistent inflation increased the odds that the Fed will maintain higher interest rates for longer, which once again pushed gold and silver lower.
Currently, gold is at $1,944, which is 1.6% lower on the week. Silver currently is eyeing a 2% weekly dip at $23.22 an ounce. If maintained, this will be the pair’s third consecutive weekly loss. Investors will be faced with a shortened upcoming trading week, as major markets in the U.S. are closed on Monday for the Memorial Day Holiday. After Memorial Day, investors will closely monitor US. Data, and the looming debt-ceiling deadline, which could come as early as June 1st, according to the U.S. Treasury Department.