Gold Drops and Silver Gains as Yields Touch Record Highs
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Last week, gold and silver saw their fourth consecutive weekly decline amid pressure from a rising dollar. This week, bullion price movements were driven by speculation over Fed policy, along with movements in the dollar index and Treasury yields.
Gold started the week at $1,913 and silver at $22.61. The pair saw a divergence on Monday, as gold touched a 4-week low of $1,906 while the dollar jumped 0.3%.Meanwhile, silver rose by 0.7% to a closing price of $22.77.On Tuesday, the Commerce Department released data that showed a 0.7% July uptick for U.S. retail sales when 0.4% was forecasted. For some, the surprising jump in sales lessened the odds of rate cuts anytime in 2023.
As a result, gold languished near the $1,900 level while the dollar and Treasury yields remained elevated. On the same day, stocks in the U.S. dipped following warnings from ratings agency Fitch, of a credit downgrade aimed at major U.S. banks.
On Wednesday, minutes from the Fed’s July 25-26 meeting were released. The meeting minutes showed the majority of participants were concerned about persistent inflation and thus favored higher interest rates, or additional interest rate hikes in 2023. Stocks tumbled following this news, as the Nasdaq Composite and S&P 500 both shed nearly 1% before Wednesday’s close.
The hawkish Fed tones also weighed on gold, as the yellow metal fell below $1,900 for the first time in nearly two months. On Thursday, the 2, 10, and 30-year Treasury yields all saw significant gains, as investors digested the FOMC minutes.
The uptick in Treasury yields pressured gold further, this time to a 5-month low of $1,885, while the 10-year Treasury yield flirted with highs not seen since 2009. Meanwhile, silver nearly breached $23, and would end the day 2% higher.
This morning, a slight dip in both the dollar and Treasury yields allowed gold to pare some of its weekly losses. However, gains were limited for the non-yield bearing yellow metal. As this is written, gold is 1.3% lower for the week, at $1,887 an ounce. If maintained, this will be gold’s fifth consecutive weekly downturn. Silver saw a divergence from gold and is modestly higher for the week at $22.73 an ounce.
U.S. equities saw little change today, while major averages are on track for weekly losses amid Fed hawkishness and concerns over the banking sector. The Dow Jones Industrial Average is eyeing a 2.3% weekly loss, which would be its steepest weekly decline in over four months. Meanwhile, the S&P 500 and Nasdaq Composite are closing in on 2% weekly losses.
