Gold Gains as Silver Drops Ahead of Rate Hike News
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Last week gold and silver managed to gain on cooler inflation data and subsequent hopes of a rate hike pause. This week, gold price movements were largely influenced by Fed rate hike bets and swings in the dollar index.
Gold started the week at $1,953 with some positive momentum, as the dollar hovered near a 1-year low. While last week’s inflation news drove many to believe the Fed may ease up on upcoming rate hikes, skepticism on that front kept gold’s gains limited on Monday. By the end of trading Monday, gold saw a modest uptick to $1,960 an ounce, while silver also rose slightly to $24.88.
Gold jumped by about 1% on Tuesday to a 1-month high of $1,976 as a dollar dip and lower yields provided some bullish momentum for metals. Meanwhile retail sales data was released, which showed a 0.3% rise in June, when 0.5% was expected. U.S. industrial production numbers were also released on Tuesday, which showed a 0.5% drop in June when no decline was expected.
The weaker-than-expected U.S. economic readings bolstered expectations that the Fed may indeed slow its pace of rate hikes. More troubling data came on Wednesday which showed new home construction in the U.S. had fallen by 8% in June.
Following this news, the dollar index touched a 15-month low near 99.553 and gold rose to its weekly high of $1,987. On Thursday, the Philadelphia Fed’s gauge of business activity rose slightly to -13.5 in July from -13.7 in June, marking its 11th consecutive negative reading. For this index, any number below zero indicates slower production. On the same day, weekly jobless claims fell to a 2-month low of 228,000 when 240,000 was forecasted.
Along with economic data, stocks were also mixed on Thursday. The Dow Jones Industrial Average rose for its ninth straight session, while the Nasdaq Composite fell by over 2%. Bond yields and the dollar both surged higher on Thursday, which pressured gold 0.9% lower to $1,969. On the same day, silver fell by nearly 2% to a closing price of $24.76.
The dollar rose by another 0.3% this morning, while investors braced for Wednesday’s FOMC meeting and rate announcement. Dollar momentum and Fed rate hike fears pressured bullion to the downside again today. Currently, gold is near $1,962 an ounce, which would still be slightly higher for the week. Silver also fell amid dollar gains and is eyeing a 0.8% weekly loss at $24.60.
On Wall Street, equities are looking at a mixed week amid corporate earnings releases. Right now, the Dow is up by over 2% for the week and seems likely to secure its 10th straight session of gains. The S&P 500 is eyeing a 0.68% weekly gain, while the Nasdaq Composite is 0.42% lower for the week. Weekly downturns from major names such as Meta and Microsoft heavily influenced losses for the tech-heavy index.
The odds still heavily favor another 0.25% rate hike at Wednesday’s policy meeting, but some believe this could be the last rate hike of 2023. Other than next week’s rate hike announcement, gold and silver price movements could be influenced by manufacturing news, and inflation data which is due out Friday.
