Gold Gains and Silver Dips Ahead of Likely Rate Cuts
Last week, gold notched a weekly uptick following U.S. employment news which paved the way for a December interest rate cut. This week, investors paid special attention to U.S. inflation data, which was due on Tuesday along with Thursday’s rate cut decision from the European Central Bank (ECB).
Wall Street saw a muted opening bell on Monday, following a 3-week wining streak for major averages. By Monday’s close the S&P 500 and Nasdaq Composite slid by 0.5% as investors prepared for Wednesday's inflation news. Meanwhile, gold jumped by 2% on Monday, to a closing price of $2,668 as the dollar rally stalled.
U.S. stocks lost ground again on Tuesday, as a risk-off sentiment permeated Wall Street. Investor concern was largely driven by political upheaval in South Korea, after news broke that President Yoon Suk Yeol declared martial law.
Safe haven buying pushed gold higher again on Tuesday amid South Korean political upheaval, and rising tensions in the Middle East. Gold found additional support following news that the People’s Bank of China (PBOC), resumed its gold purchases after a six-month pause. As a result, gold gained 0.9% on Thursday but failed to reach the $2,700 level.
On Wednesday, the Labor Department reported that U.S. consumer prices rose by 0.3% in November, marking the most significant CPI increase in seven months. Although inflation was moving in the wrong direction, November's price increases aligned with expectations, suggesting the Fed is unlikely to be discouraged from cutting rates once more in 2024.
Despite the inflation news, surging tech shares led the Nasdaq above 20,000 for the first time on Wednesday. Meanwhile, gold reached a two-month high of $2,713 and silver breached $32, as the odds of a December rate cut rested near 85% according to the EM FedWatch Tool.
Sticky inflation pressured stocks to the downside on Thursday, as major averages booked losses. Further pressure came from the bond front, where the 10-year Treasury yield neared a one-month high of 4.32%. Higher yields and profit taking pressured bullion on the same day, as gold shed 1% on its way to a closing price of $2,686.
Gold slipped again this morning but notched a modest weekly gain at $2,649. Silver also fell this morning, resulting in a 2% weekly loss at $30.55 an ounce. Stocks ended the week on a mixed note as the S&P 500 and Dow Jones Industrial Average shed 0.53% and 1.83% respectively. However, tech sector strength led the Nasdaq Composite to a 0.52% weekly uptick.