Gold and Silver Gain Amid Dollar Decline

So far, 2022 has proven difficult for Wall Street amid rising bond yields and tightening monetary policy. Tech stocks began the week with a Monday rally, allowing the Nasdaq to snap its 2022 losing streak. The dollar index was also slightly higher on Monday. Gold and silver were undeterred, starting the week near $1,794 and $22.20, respectively. 

As markets opened on Tuesday, bond yields were still moving higher, while stocks continued to drop. For investors, this week’s key scheduled events were Fed Chair Jerome Powell’s appearance before the Senate, and inflation data releases throughout the week. 

During his renomination hearing in front of the Senate Banking, Housing and Urban Affairs Committee, Powell confirmed the central bank’s more hawkish stance in response to record U.S. inflation. Specifically, the Fed Chair stated that the central bank planned to end asset purchases by March and raise interest rates throughout the year.

While Powell’s renomination seems likely, few believe the central bank had a choice as it pertains to a tightening of monetary policy amid red-hot inflation. While there was no surprise stemming from Powell’s testimony, some investors were calmed as Wall Street closed higher. 

Meanwhile, the dollar downturn commenced and metals gained. Despite higher yields, gold jumped nearly 1% on Tuesday, while silver gained 1.2%. With inflation running hot, investors looked to Wednesday’s CPI numbers for directional hints. 

Wednesday’s inflation data largely met forecasts, which was not necessarily good news. The consumer price index rose 7% in December from December of 2020. This marked the fastest yearly rise in inflation since 1982. Possibly because the inflation gain was in line with forecasts, U.S. stocks moved higher on Wednesday. 

The dollar pullback continued into Wednesday, while gold and silver prices jumped once again. Gold reached a one-week high near $1,828, while silver surged by nearly 2%, reaching $23.19. Thursday brought negative news via a surprise jump in jobless claims, along with record wholesale prices. The Labor Department reported that unemployment claims jumped to 230,000 last week, which was 15% higher than the forecast. 

Thursday’s producer price index revealed a 9.7% increase in wholesale prices. This was the largest increase in wholesale prices since 2010. Thursday’s unemployment data coupled with the wholesale inflation reading, ended Wall Street’s momentum. The Nasdaq ended its three-day winning streak, falling by 2.5%. 

The dollar downturn accelerated as the week drew to a close, paving the way for bullion gains. In fact, the dollar index was down by 0.9% on Thursday, which would put it on a path to its steepest weekly decline in over seven months. 

It was predicted that U.S. retail sales would drop 0.1% in December. However, the Census Bureau reported a shocking 1.9% decline on Friday. Some are citing inflation as a reason for the slowdown in sales. Stock futures pointed to another bad day on Wall Street, as investors digested the retail disappointment. 

Gold held steady this morning around $1,820, up 1.4% for the week. Silver also held firm near $22.94 an ounce, which would be a weekly gain of 3.3%.