Gold and Silver See Another Losing Week on Rake Hike Bets and Dollar Strength

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At last week’s Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell reaffirmed the Fed’s commitment to fighting record inflation by continuing to raise interest rates. Powell indicated that the U.S. economy would likely encounter softer labor market conditions and even slower growth with a continual raising of rates.

The Fed Chair stated that failure to stabilize inflation would result in pain “far greater” than what is currently being felt by increasing rates. Investors soon digested the Fed’s hawkish affirmation, resulting in a sell-off on Wall Street, dollar gains, and downward pressure for gold and silver prices. 

Gold began this week at $1,723 an ounce, while silver started the week near the $18.55 mark. Metals found some initial momentum on Monday as the dollar rally cooled, but gains for the pair were capped at $1,734 and $18.71. The stock market sell-off continued into Monday, as all three major averages slid lower. The Nasdaq Composite lost the most, at 1.2%. 

The prospect of higher interest rates continued to weigh on Wall Street sentiment into Tuesday as the Dow, Nasdaq, and S&P 500 all shed just over 1%. Meanwhile, precious metals were lower as Treasury yields rose. Most notably, the two-year note reached nearly a fifteen-year high of 3.498%. Wednesday saw more pressure for metals, and a fourth consecutive day of stock market losses. ADP jobs data was released on the same day, revealing that the U.S. private sector added 132,00 jobs in August, when forecasts were closer to 300,000. 

U.S. equities would end the month lower, as the S&P 500 and Dow lost just over 4%. The Nasdaq Composite fared the worst of all major indices, at a 4.7% monthly loss. With higher yields and rate-hike jitters, gold languished at one-month lows of $1,703 on Wednesday. On the same day, silver fell by 4%, to $17.73 an ounce. Gold and silver declined 3.2% and 12% respectively, in August. 

Better-than-expected news on the jobless claims front and more encouraging U.S. manufacturing data added to dollar strength on Thursday, which again pressured gold to the downside. Gold would hover near six-week lows just below $1,700 on Thursday, while silver touched two-year lows of $17.53. 

Nonfarm payroll data was released this morning, showing a surprising 315,000 new payrolls for August, when 300,000 was forecasted. Meanwhile wage growth slowed, and the unemployment rate saw a slight uptick. For many, the positive payroll news only increased the likelihood of more severe rate hikes in September. 

Stocks opened higher today after this morning’s jobs news, but all three major indices are slightly lower for the week. Currently, the Dow and S&P are eyeing losses of just over 1%, while the Nasdaq may lose closer to 2%. 

Following the payroll news, gold was able to break higher to the $1,715 mark, while silver jumped to $18.28 an ounce. Despite today’s momentum gold is still on track for a weekly loss of 0.4%, while silver is eying a 1.8% weekly dip. 


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