Gold and Silver See Weekly Losses Amid Diminished Rate Cut Odds
Last week, gold and silver pared early losses for weekly gains amid news that the U.S. and U.K. had clashed with Iranian-backed Houthi rebels in the Red Sea. This week, markets were driven by sentiment regarding Fed rate cut odds. Major markets were closed on Monday in observance of the Martin Luther King Jr. Holiday.
Gold and silver started the trading week off on Tuesday, at $2,048 and $23.11, respectively. However, the pair would see losses on Tuesday, following remarks by Fed Governor Christopher Waller, in which he confirmed that rate cuts are likely this year, but indicated that the central bank would take its time in lowering rates, especially as inflation in the U.S. inflation persists.
These comments seemingly ran counter to what market expectations have been for a rate cut as soon as March. The benchmark 10-year Treasury yield jumped to 4.0634% following Waller’s remarks, while the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 all posted daily losses.
Wednesday was busy in terms of economic data, which has heavily influenced investor sentiment regarding monetary policy. U.S. retail sales seemed to dominate headlines with a 0.6% December uptick when a 0.4% rise was forecasted. This data outlined a better-than-expected holiday season in terms of consumer spending. The surprising jump in retail sales seemingly illustrated a more resilient U.S. economy and dented the odds of a Fed rate cut in March.
Following the release of U.S. retail sales data on Wednesday, the odds of a rate cut in March fell to 57% from over 70% a month prior, according to the CME FedWatch Tool. As a result, bond yields rose once again, and stocks fell on Wednesday, marking Wall Street’s third consecutive session of losses. Higher yields and Fed hawkishness also pressured metals on Wednesday, as gold touched a 1-month low of $2,002. Meanwhile, silver saw a modest decline and ended the day at $22.60.
Geopolitical tensions were heightened in the Middle East on Thursday, following news that Pakistan launched airstrikes in Iran, which reportedly resulted in 10 casualties. At the same time the U.S. conducted more air strikes against Iranian backed militia groups in Yemen. After this news, gold saw safe-haven inflows and ended the day higher, at $2,022 an ounce.
Stocks also recovered on Thursday, amid stronger earnings from tech companies such as Apple and Taiwan Semiconductor Manufacturing. Wall Street’s tech-rally continued into this morning, which pushed major indexes higher. As a result, the tech-heavy Nasdaq is now eying a weekly gain of 0.91%, while the S&P 500 is currently 0.19% higher for the week. Meanwhile, the Dow Jones Industrial Average is likely to post a 0.61% weekly loss.
The dollar eased this morning, while geopolitical tensions continued to provide safe-haven support for precious metals. As a result, gold and silver managed to pare some weekly losses, but are still eying a losing week. As this is written, gold is near $2,025, which is 1.2% lower for the week. While silver managed to bounce from its own 1-month low near $22.44, the gray metal is currently 2.6% lower for the week at $22.51 an ounce.
Next week, markets will likely be reactive to economic data which continue to heavily influence monetary policy bets. With this backdrop, Thursday’s GDP data will be a focus of investors next week, along with inflation data due out on Friday.