Gold and Silver Fall as the Dollar Surges
Last week, gold notched a weekly gain as weaker U.S. economic data led to hopes of a Fed rate hike pause. This week was shorter in terms of trading days, as major markets in the U.S. were closed on Monday in observance of the Labor Day holiday.
Gold and silver started the trading week near $1,937 and $23.84, respectively. On Tuesday, investor concern over economic slowdowns in Europe and China spurred a safe-haven rush to the dollar. This sent the dollar index to a 6-month high of 104.92, which resulted in 0.5% and 1.2% respective daily losses for gold and silver.
With the September 20th policy meeting looming, the Fed’s Beige Book was released on Wednesday. The Beige Book is a compilation of anecdotes collected from Fed officials across all of its 12 districts and is often used as a source of information for upcoming policy meetings.
The Fed’s Beige Book revealed that retail sales along with hiring slowed in July and August. It also stated that “skilled workers and the number of applicants remained constrained.” According to the CME FedWatch Tool, there is over a 90% chance that the Fed will keep rates unchanged at the upcoming policy meeting. However, the door remains open for additional rate hikes before 2024.
The prospect of higher interest rates and a slowing economy meant the dollar would remain near 6-month highs on Wednesday amid safe-haven inflows. At the same time, the benchmark 10-year Treasury yield firmed, which decreased the appeal of non-yielding gold. As a result, gold dropped to a 1-week low of $1,919 on Wednesday, while silver fell by nearly 2%.
By Thursday, U.S. equities were on track for weekly losses, as Fed hawkishness dampened the mood on Wall Street. On the same day, it was reported the U.S. jobless claims had fallen for the fourth consecutive week, to their lowest since February. Gold saw a mild uptick to the $1,924 mark on Thursday but was still on track for a weekly dip.
Major stock market averages such as the Nasdaq Composite and the Dow Jones Industrial Average are likely to end their 4-day losing streaks today, but all three major averages are on track for weekly losses. As this is written, the Dow is down by 0.85% for the week, while the S&P 500 is eyeing a 1.5% weekly loss. Despite Apple shares surging this morning, the tech-heavy Nasdaq is currently 2.4% lower for the week.
Despite a mild dollar downturn this morning, gold is still eying a 0.8% weekly loss at $1,920 an ounce. Meanwhile, silver fell below the $23 mark for the first time in nearly a month. Following this morning’s loss, silver is currently hovering near $22.92, which would be a 3.8% weekly loss.
Next week investors will look closely to inflation data due out Wednesday, along with producer price data on Thursday, for additional clues as to the Fed’s next move.