Gold and Silver Fall on Fed Hawkishness


Last week, gold and silver saw little weekly change as the U.S. Federal Reserve Bank announced a much-anticipated pause to its rate hiking campaign. Meanwhile, stocks in the U.S. touched fresh highs as Fed rate hike optimism permeated Wall Street. This week, gold and silver prices were largely influenced by hawkish Fed speak.Major markets were closed on Monday in observance of the Juneteenth holiday. Gold started the trading week at $1,955 on Tuesday and dipped to $1,930 amid dollar gains and news that U.S. housing starts jumped to a 1-year high in May. On the same day, silver fell by 3.2% to a 3-week low of $23.12.On Wednesday Federal Reserve Chair Jerome Powell testified before the U.S. House of Representatives. In his testimony Powell stated that, “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.” The Fed Chair also said that inflation in the U.S. remains well above target, and that more interest rate hikes would be needed this year to combat record price increases.In previous speeches Powell stated that two additional rate increases of 0.25% are likely before 2024. That would bring the Federal Reserve’s benchmark rate up to 5.5%-5.75%. By Wednesday, gold was languishing at a 3-month low near $1,932 as rising bond yields and hawkish Fed speak kept pressure on the yellow metal. Similarly, silver touched its own 3-month low of $22.62 on the same day.Stocks in the U.S. rose on Thursday, as the S&P 500 and Nasdaq Composite both ended three-day losing streaks. In previous sessions, Wall Street sentiment had been dampened by prospects of more Fed rate hikes. Gold continued its move lower on Thursday to $1,909 an ounce, while silver saw its own weekly low of $22.10. The pair moved lower following hawkish remarks from Fed Chair Powell, this time during his testimony before the U.S. Senate.Gold managed to pare some losses on Thursday, as data from the Bureau of Labor Statistics showed 264,000 weekly jobless claims when 256,000 had been forecasted. This meant jobless claims in the U.S. would remain at nearly a 2-year high. For some, it also lessened the odds of Fed rate hikes.Despite earlier gains, gold is currently at $1,920 and on track for a 1.8% weekly drop. Silver followed a similar weekly trajectory and is 6.3% lower for the week, at $22.38 an ounce. Stocks in the U.S. were lower again today as Fed hawkishness weighed on the minds of investors.As this is written, the S&P 500 is eyeing a 1.7% weekly dip while the Nasdaq Composite and Dow Jones Industrial Average are both nearly 2% lower for the week. For next week, investors will look to U.S. employment data and inflation news as factors that will influence the Fed’s next move.

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