Gold and Silver See Weekly Gains and a Monthly Divergence Amid Fed Hawkishness


There was disquiet amongst investors this week, regarding the effects of continual rate hikes on an already-distressed economy. There was no shortage of scheduled economic events with housing data, jobless claims, and Fed speak all happening throughout the week. The latter was of importance to many, as investor sentiment seemingly hinged monetary policy news.

 Interest rate fears rocked equites to start the week, as the Dow Jones Industrial Average plunged into a bear market on Monday while the S&P found a new low for 2022. Gold and silver were conflicted with safe haven buying providing support, while dollar strength and higher yields pressured the pair. As a result, neither saw significant movement on Monday with gold staying near $1,636 and silver closing at $18.56.

This trend continued into Tuesday, as yields on the ten-year Treasury note climbed to ten-year highs near 4%. At the same time, several Fed officials gave addresses on Tuesday, with Fed Chair Jerome Powell calling for regulation of cryptocurrencies in remarks during a panel discussion regarding digital finance. 

Following his remarks, two of the world’s largest cryptocurrencies in Bitcoin and Ethereum rose by 5.2% and 4.4% respectively. Some attribute the rise to a belief that regulation of these assets could lead to greater institutional adoption. 

At the same time, Wall Street’s sell-off continued as both the S&P 500 and Dow slipped further into bear market territory. Metals were slightly lower on Tuesday, with gold closing near $1,623 and silver ending the day at $18.17. 

The Wall Street sell-off halted on Wednesday, as the Dow and S&P 500 both gained nearly 2%, ending a six-day losing streak. On the same day, gold bounced from 2 ½- year lows near $1,615 ending the day 2.4% higher at $1,655. Meanwhile, silver rose by 4.1% and would end trading at $18.74. 

A stronger-than-expected jobless claims report from Thursday did not improve Wall Street sentiment, as the sell-off resumed. Of the major averages, the Nasdaq Composite fell the most at nearly 3%, while the S&P 500 found fresh lows for 2022. A pause in the dollar rally coupled with safe haven buying supported gold momentum on Thursday and Friday. 

As this is written, gold is hovering near $1,665 an ounce, which is 1.6% higher for the week. For September, gold is likely to shed about 2.3%, for its sixth-straight monthly loss. Silver has seen a slight divergence from gold and is currently at $19.08 which, if maintained would solidify a 2.7% weekly gain, and 8.9% gain for September. 

U.S. equities had a much worse month, as rate hike jitters weighed on Wall Street sentiment. As of today, The Dow is 7.6% lower for the month, while the S&P 500 and Nasdaq are both nearly 9% lower for the September.

Many maintain a gloomier outlook for equities in October, as Fed officials have reiterated their commitment to combating inflation by raising interest rates, even if the economy falls deeper into a recession. Historically, stocks have not faired well in October, with “Black Monday” of 1987, “Black Tuesday” of 1929, and the most severe stock market meltdown of 2008, all occurring in October.

 A gloomier economic outlook is often supportive for gold, but if the prior five months are an indicator, rate hikes, a stronger dollar, and higher yields may prove to be formidable foes to the yellow metal’s momentum.

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