Gold and Silver Succumb to Higher Yields and Dollar Strength

Throughout this week, investors looked for developments on a variety of fronts. The continued Russia-Ukraine conflict, persistent inflation, and the prospect of higher-than-expected interest rates all affected investor sentiment. Meanwhile, bullion prices were conflicted. An abundance of uncertainty proved supportive, while higher yields and a stronger dollar pressured gold and silver. 

Gold and silver would both see their respective weekly highs on Monday of $1,997 and $26.21. The big headline from Monday came from the bond market. The 10-year Treasury yield reached four-year highs near 2.94% while the 30-year Treasury note was coming off highs near 3%. Meanwhile, U.S. equities seesawed and ended the day slightly lower. 

Tuesday was marked by dollar strength and a precious metals pullback. While the dollar index touched a two-year high on Tuesday, gold fell 2.6% from previous session highs to $1,944. Silver prices also dipped but managed to maintain just above $25 an ounce. The dollar movement seemed to be fueled by comments from St. Louis Fed President James Bullard on Monday, in which he said the central bank should not rule out rate increases of 75 basis points. 

Stocks were mixed on Wednesday, largely driven by corporate earnings. Tesla dominated headlines with another record quarter, despite supply chain woes. The Nasdaq Composite was weighed down with significant losses led by Netflix, as shares were down by over 34% by the closing bell. Losses there were driven by news that the company had lost subscribers for the first time in a decade. 

Metals were little changed on Wednesday as gold stayed around $1,951 and silver near $25.28. The expectations of a more hawkish Fed and higher yields in many cases would have been more significant detractors to bullion prices. However, gold and silver remain buoyed by record inflation, Ukraine-Russia worries, and investor concerns over stagflation. 

Gold has benefited from steady demand. According to CFTC data, last week marked 13 consecutive weeks of inflows to gold ETFs. The International Monetary Fund (IMF) also released their World Economic Outlook this week, in which concerns were raised over higher odds of a stagflation in 2022. 

The gloomy outlook permeated Wall Street on Thursday as major indices dropped, despite positive corporate earnings. By day’s end, the S&P 500 was down by nearly 1.5% and the Nasdaq Composite had shed 2%.

A resumption in the Treasury yield rally was bad news for both equites and metals. Gold and silver were also marginally lower on Thursday, at $1,936 and $24.43 as the day ended. Global growth concerns and record inflation have led some large investors to sell bonds in recent weeks which in turn, has led to the surge in yields. 

Despite inflationary concerns and steady demand, bullion prices could not withstand dollar strength and the yield rally. At the moment, gold is at $1,934 an ounce, which is 3.2% lower on the week. Silver is currently near $24.20, which would be a 7.6% weekly loss.