Gold Breaches $2,400 Despite Dented Rate Cut Odds
Last week, gold managed to reach new all-time highs despite dented rate cut odds and higher yields. While similar headwinds persisted this week, gold and silver continued to perform as central bank buying and safe haven inflows supported the pair.
Gold started the week at $2,341 and managed to reach a record high for its seventh consecutive session on Monday, with a closing price of $2,347. While gold enjoyed safe haven buying as concerns of conflict between Israel and Iran intensified, silver would trade in a tight range near $28.80 until Thursday. Stocks were flat on Monday amid light trading volume, likely due to the lunar eclipse. According to NYSE data, Monday’s trading volume was lower than Easter Monday, in terms of shares traded.
Stocks were muted again on Tuesday, as focus shifted to Wednesday’s scheduled release of inflation data. Meanwhile, U.S. Treasury yields ticked up to four-month highs. Despite higher yields, gold hovered near record highs, as concerns over conflict in the Middle East intensified. The yellow metal was also supported by robust central bank buying, as China’s central bank confirmed that 160,000 ounces of gold were added to its reserves in March.
The much-anticipated inflation data was released Wednesday and revealed that the Consumer Price Index climbed 3.8% on a yearly basis, when economists had predicted a 3.7% increase. In addition to the yearly uptick, prices of consumer goods rose 0.4% in March, which exceeded forecasts of 0.3%. Gold fell immediately following this news, along with the odds of a June interest rate cut.
According to the CME FedWatch Tool, the odds of a June rate cut were at 16.5% following the inflation news, down from 55% Monday. The hotter inflation reading prompted a selloff on Wall Street, which meant stocks were sharply down on Wednesday. Gold quickly erased earlier losses before Wednesday’s close, as Treasury yields dropped.
Gold continued its momentum into Thursday, as tensions between Iran and Israel heightened. Specifically, intelligence officials voiced concern that Iran or one of its many proxy groups may strike Israel with missiles or drones. This news, along with lower-than expected wholesale inflation data via the Producer Price Index, propelled gold to a fresh all-time high of $2,344 before the end of trading on Thursday.
Continued safe haven buying pushed gold above $2,400 for the first time ever this morning, while silver touched the $29.70 mark for the first time in over two years. While the pair would ease from their relative highs this afternoon, both managed to notch weekly gains. Gold ended the week at $2,344 and secured its fourth consecutive weekly uptick, while silver ended the week 0.5% higher at $27.93.
As metals surged, Wall Steet endured a continued selloff today, as inflation and geopolitical woes weighed heavily on investor sentiment. All three major averages ended the week in the red, as the Dow Jones Industrial Average notched the most significant weekly downturn of 2.41%. Meanwhile, the Nasdaq Composite and S&P 500 saw 0.68% and 1.68% respective weekly losses.