Gold and Silver Plunge on Positive Economic News


Last week, gold saw modest gains as investors anticipated another 0.25% rate hike from the U.S. Federal Reserve Bank. As this week started, the focus was still on Wednesday’s Fed decision while a bevy of U.S. economic data was set to be released later in the week.

 Gold started the week at $1,960 and silver at $24.58. The pair would see little change on Monday or Tuesday, as markets had priced in over a 90% chance of a quarter-point rate hike on Wednesday. Wall Street stocks saw an uptick on Monday as earnings from companies such as Chevron exceeded expectations.

 Earnings continued to boost investor sentiment on Tuesday, as second quarter data from Google owner Alphabet along with Microsoft boasted better-than-expected earnings. This led to another day of stock market gains and an uptick in U.S. Treasury yields. At this point, gold and silver were little changed at $1,965 and $24.64, respectively.

 On the same day, the Conference Board’s Consumer Confidence Index jumped to a 2-year high of 117. Those polled perceived a more resilient U.S. economy, despite inflationary concerns. As expected, the Fed delivered a 0.25% rate hike on Wednesday, bringing the benchmark borrowing rate to 5.25%-5.5%.

 In a press conference following the decision, Fed Chair Jerome Powell stressed that the central bank would likely not cut rates in 2023 and that policy makers would take a “meeting by meeting” approach to gauge inflation and subsequent interest rate hikes.

 Stocks rose again following the rate hike news, as the Dow Jones Industrial Average notched its longest winning streak in over 40 years. At the same time, gold rose to $1,977, while silver breached $25 for the first time in over 2 months as the dollar dipped.

 Momentum for the pair wouldn’t last long as on Thursday, positive U.S. economic data would weigh heavily on gold and silver. The first round came via jobless claims, which slumped to their lowest since February. Additionally, second quarter U.S. GDP growth came in at 2.4% when economists had predicted 2.0%.

 The positive economic data jolted the dollar and bond yields higher which, in turn, pressured gold nearly 2% lower from its weekly peak of $1,981, down to $1,943 by Thursday’s close. Meanwhile, silver fell by 4% to a closing price of $24.09.

 Gold and silver managed to pare losses this morning but were unable to overcome weekly losses. As this is written, gold is at $1,958, which is modestly lower for the week, while silver is 1% lower at $24.30 an ounce. With the July FOMC meeting out of the way, investors will likely focus on various economic data releases next week in manufacturing data, jobless claims, and nonfarm payrolls.

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