Gold and Silver See Second Weekly Drop as the Dollar Rises


Last week, gold and silver ended their respective winning streaks, as the dollar benefited from risk aversion related to U.S. debt ceiling talks. These concerns continued to drive investor sentiment throughout this week, while scheduled economic events primarily consisted of Fed speaking engagements and economic data releases.

Gold started the week at $2,016 and silver at $24.04. The pair saw very little change on Monday, while fears over the U.S. debt ceiling standoff bolstered the dollar index. The dollar uptick continued into Tuesday, while the 10-year Treasury yield touched a two-week high. These moves came after remarks from the U.S. Secretary of the Treasury Janet Yellen, which underscored the need for President Biden and Congress to reach a debt ceiling deal before the potential default date of June 1st. 

Debt ceiling woes drove stocks lower on Tuesday, while gold and silver also retreated as the dollar continued to rise. By Tuesday’s close, gold had shed 1.3% at $1,990, while silver ended the day at $23.75. The gold decline continued into Wednesday, as the dollar index reached nearly an eight-week high. Hawkish Fed speak regarding interest rate cuts also weighed on the yellow metal for a slightly lower Wednesday close at $1,980.

Hawkish Fed bets were supported by lower-than-expected jobless claims on Thursday, which pressured gold to the downside once again. On the same day, the Speaker of the U.S. House of Representatives Kevin McCarthy, announced that a debt-ceiling vote could be held as early as next week. These factors, along with a rising dollar pushed gold to a seven-week low of $1,952 on Thursday, while silver touched its own two-month low of $23.33 on the same day. 

This morning, it was rumored that debt-ceiling negotiations had been halted. This news dented risk appetite on Wall Street which resulted in a downturn for major indices. Despite today’s move lower, the Nasdaq Composite is currently on track for a 2.9% weekly gain. Meanwhile, the S&P 500 is looking at a 1.6% weekly uptick after dropping below its 50-day average earlier in the week. 

In addition to stocks, the dollar was also driven lower by the debt ceiling news this morning. Despite this morning's losses, the greenback is on track for a 0.4% weekly gain. Gold and silver rose this morning but are still on track for weekly losses. 

Currently, gold is near $1,977 an ounce, which would be a 1.9% weekly downturn. Meanwhile, silver is 0.7% lower at $23.87 an ounce. Like last week, metals were pressured lower by a rising dollar index. This, along with more hawkish Fed speak pressured gold and silver to their second consecutive weekly loss. In the near-term investors will closely monitor debt ceiling news, along with the release of Fed meeting minutes, inflation data, and employment news, all set for release next week.

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