Gold and Silver Rise Despite Fed Shift

As the conflict in Ukraine continues and the death tolls in city centers rise, the Russian troop movements have stalled in many places - leading to a bloody stalemate. Many investors in the U.S. have shifted their focus to an increasingly hawkish Fed, as inflation shows no sign of slowing. 

After last week’s Fed update and rate hike, investors had seemingly priced in six additional rate increases of 0.25% for 2022. Following this, major U.S. equities had their best week since December of 2020, while gold and silver both lost just over 2%. 

On Monday, markets reacted to Fed Chair Jerome Powell’s remarks at the National Association for Business Economics that were notably more hawkish than his update following last week’s meeting. In his more recent address, Powell mentioned incorporating rate hikes of 0.5% as opposed to 0.25% in response to record inflation. 

Stocks in the U.S. declined following Powell’s comments, with The Dow and S&P 500 both dropping nearly 0.50% while energy prices and Treasury yields surged. Meanwhile, gold rose to $1,934 an ounce, as silver breached $25 on its way to $25.24 an ounce. 

Despite a stronger dollar and interest rate news, silver was little changed on Tuesday, while gold touched its weekly low of $1,911. On the same day, U.S. stocks rebounded with the S&P 500 rising 1.2% while the Nasdaq Composite rose by almost 2%.

Risk-off sentiment was higher Wednesday, as surging energy prices added to inflation concerns. Developments in Ukraine increased investor caution, as talks between the two nations failed to bring progress. Meanwhile, the world watched as the Ukrainian military refused to cede control of the port city Mariupol, resulting in more shelling from the Russian military. 

Seemingly in keeping with other growth stocks, cryptocurrencies such as Bitcoin and Ethereum dropped on Wednesday, as they both shed over 1%. At the same time, gold surged by 1.8%, reaching $1946, while silver steadied around $25.16 an ounce. Attention shifted to a NATO Summit regarding the Ukrainian conflict and U.S. economic data, both set for Thursday. 

At the NATO Summit, Ukrainian President Volodymyr Zelenskyy urged citizens around the world to “make yourselves visible and heard.” He also levelled additional accusations of war crimes committed by the Russian military, as he addressed NATO via a video link. The United States subsequently announced additional sanctions against Russian elites and members of parliament, while the European Union pledged an additional $550 million in aid to Ukraine. 

Thursday also saw a lower-than-expected weekly jobless claims print, at 187,00 against the 215,000 that was forecasted. This preceded a stock market rally and rise in bullion prices. While sentiment on Wall Street was more positive, bullion was still buoyed by the conflict in Ukraine and record inflation. On Thursday, gold rose to its weekly high of $1,965, as silver touched $25.84. 

Stocks were slightly higher Friday morning, while U.S. yields eased from recent highs. Despite the prospect of higher-than-expected interest rates, gold bulls maintained momentum with record inflation and geopolitical uncertainty both contributing to the safe-haven appeal of metals. As this is written, gold is hovering near $1,950 an ounce. This would be a 1.6% gain for the yellow metal. Silver is currently 1.9% higher, at $25.43 an ounce.