Gold and Silver Shine as Inflation Runs Hot


This week began with Wall Street optimism on the heels of several weekend developments. Late Friday, the US House of Representatives passed a more than $1 trillion infrastructure bill, which will likely be signed by President Biden on Monday. 

Tesla founder Elon Musk once again made headlines over the weekend when he put out a Twitter poll, asking if he should sell 40% of his Tesla stock. This was in response to politicians putting forth the idea of taxing unrealized capital gains. 58% of respondents said yes to Musk’s poll. Following this, Tesla shares dipped by nearly 5% on Monday. 

US stocks found momentum Monday following approval of the $1 trillion spending package, coupled with a stronger jobs report from Friday. As a result, all major indices opened higher. The Dow Jones reached record highs, while the S&P 500 closed at a record high for the 8th consecutive day. 

For bullion, gold had seemingly shrugged off Friday’s positive jobs news and opened the week close to $1,814 an ounce. Silver would start the week closer to $24.08. Both metals started the week on positive footing as the Dollar was retreating from one-year highs. 

Investors awaited Wednesday’s inflation data, while bullion prices tracked with USD movements. On Tuesday, gold reached a two-month high of $1,830, while silver met some resistance, closing near $24.30. 

Some have said that factors leading to higher inflation are transitory in nature, so the rise in prices should not be seen as a long-term move. However, investors and normal citizens alike are encountering consistent and significant price increases. For these reasons, much weight is put into inflation data updates. 

Wednesday’s inflation data showed that consumer prices jumped once again, causing US inflation to reach a 31-year high. Inflation woes dented broader market optimism, sending US stocks into a retreat. The Nasdaq fell by 1.6% while the Dow dropped by 240 points and Treasury yields surged. 

The spike in inflation caused investors to favor safe-haven assets such as gold. Gold surged to nearly a 5-month high on Wednesday, near $1,868. Meanwhile, silver surged by nearly 4% to $25.12 an ounce. Higher inflation readings caused some analysts to speculate that the Federal Reserve may indeed increase interest rates sooner than expected.

Stocks were mixed on Thursday while bond markets were closed in observance of Veterans Data. Gold saw little change on Thursday, ending the day around the $1,861 mark. However, silver climbed higher on Thursday, reaching a 3-month high around $25.25. 

By Friday, gold had seen six consecutive days of gains. That being so, gold encountered some selling pressure via profit-taking this morning. The dollar also surged to a 15-month high, which added additional downward pressure to gold and silver prices. 

However, both metals had enough momentum to survive the dollar rally and are eying weekly gains. Currently, gold is sitting at $1,860 which, if maintained, would be a weekly gain of more than 2.5% for the yellow metal. As is often the case, silver moved in the same direction as gold, and is looking at a 5% weekly gain. 

Back to Insights