Gold Battles the Dollar Ahead of Next Week’s Fed Meeting
In recent weeks, precious metals have enjoyed support from a declining dollar, lower Treasury yields, and hopes that the U.S. Federal Reserve may ease the pace of rate hikes. As a result, gold was at a five-month peak of $1,809 as the week began, and silver was at its own eight-month high near $23.44.
There was a slight reversal in this trend on Monday, following a report from the Institute for Supply Management (ISM) which showed that U.S. services industry activity saw an unexpected uptick in November. The better-than-expected economic data boosted the odds that the Fed will maintain higher interest rates for a longer period of time.
Subsequently, Gold fell by over 2% to $1,770 while silver shed nearly 4% to a closing price of $22.35. Meanwhile, the dollar and Treasury yields surged higher while stocks in the U.S. also slid lower. Most notably, the Nasdaq Composite had fallen by nearly 2% by Monday’s close.
Gold rose slightly on Tuesday, while Treasury yields slipped and the dollar surrendered some its recent gains. Silver was slightly lower on Tuesday, with a closing price of $22.30, while gold was marginally higher at the $1,773 mark. On the same day, U.S. equities extended their losses as investors employed more caution with concerns over higher interest rates and U.S. economic health.
Risk-off sentiment was prevalent once again on Wednesday, as the S&P 500 fell for the fifth consecutive session. Other indices were mixed as investors braced for employment news on Thursday and next week’s Fed meeting. Weaker exports from China added to fears of a global recession, which drove gold back above $1,780 and silver to a closing price of $22.65 on Wednesday.
Thursday’s jobless news revealed that unemployment filings jumped by 4,000 from the previous week, and that the number of American workers applying for unemployment benefits rose to 230,000 in the first part of December. The dollar index edged lower following the employment news, while gold ended the day slightly higher near $1,795.
While stocks in the U.S. were slightly higher on Thursday, major averages wavered between gains and losses on Friday, as rate hike jitters continued to plague Wall Street. As this is written, the Nasdaq Composite is eying a 2.2% weekly loss while the S&P 500 and Dow are down 2.1% and 1.7% respectively.
This morning’s headlines were dominated by news that wholesale prices rose 0.3% in November. The hotter-than-expected inflation news added to concerns that The Fed may remain committed to more aggressive policy tightening. As a result, gold lost some its momentum, while bond yields and the dollar edged higher.
Despite gold’s late-week momentum, the yellow metal was unable to overcome Monday’s steep decline. Currently, gold is hovering near $1,798 which is 0.61% lower for the week. Silver is currently 1.3% higher for the week at $23.50 an ounce. Investors are anticipating the next Fed meeting, which is set to occur next Wednesday. As of now, markets expect 50 basis-point rate hike, which would be a decrease from the prior rate hikes of 75 basis-points.