Gold and Silver Shine Following Inflation News


Inflation news along with Fed speak played a significant role in driving investor sentiment this week. Gold and silver prices were especially reactive to dollar index and Treasury yields declines throughout the week. Ultimately, a fresh round of inflation data would be the catalyst for significant gold gains. 

Last Friday’s positive employment news allowed for momentum on Wall Street as this week began, but major averages were mixed by the end of trading on Monday, lacking in momentum for either direction. New York Fed 1 and 5-year inflation projections were released on the same day, with data coming from a survey of consumer expectations forecasting 5% inflation one year from now, and 3% three years from now. Meanwhile gold saw little change, with spot price hovering near $1,870 while silver declined by 1.5% to a closing price of $23.61. 

In his Tuesday address at the Symposium on Central Bank Independence in Stockholm, Fed Chair Powell opined on the need for central banks to take necessary but unpopular steps to pursue price stability. Many interpreted the address as hawkish in nature but despite this, stocks in the U.S. rose following his remarks. 

On the same day, gold touched a 7-month high of $1,876 while silver stayed near the $23.60 mark. Stocks moved higher again on Wednesday, as hopes of lower inflation numbers created optimism among investors. Gold and silver saw little change on again Wednesday, while the dollar edged lower and the benchmark 10-year Treasury yield dipped below 3.7%. 

Thursday’s inflation data was in alignment with expectations, as the Consumer Price Index dropped by 0.1% in December. This marked the first decline in the cost of living for U.S. citizens since 2020. Hopes that inflation has peaked in the U.S. fueled optimism that the Fed would ease the pace of interest rate hikes. As a result, stocks edged higher again on Thursday while the dollar index fell by nearly 1%. 

On the same day, silver gained 1.4% to $23.80 an ounce, while gold briefly rose above $1,900 for the first time in nearly 8 months.  Precious metals were supported by rate hike optimism and a declining dollar index. 

Stocks in the U.S. initially dipped on Friday, but all three major averages are eying their second consecutive week of gains following an abysmal 2022. As of this morning, the Dow Jones Industrial Average is 1.6% higher for the week, while the S&P 500 and Nasdaq Composite are on track for 1.7% and 3.5% respective weekly gains.

Gold’s momentum continued into Friday, with spot price currently nearing the $1,920 mark. This would be a 2.7% weekly gain for gold and its fourth consecutive week of gains. As this is written, silver is 1.2% higher for the week at $24.26 an ounce. 

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