Gold & Silver Fall as Markets Digest Inflation, Omicron


As a new month began, there was no shortage of headlines or market developments that spurred investors to re-evaluate risk appetite. To start, Wall Street was plagued by hysteria surrounding the COVID-19 Omicron variant, resulting in a volatile week for stocks. Omicron cases have indeed been verified in the U.S. However, symptoms have been reported to be mild so far. 

It wasn’t just Omicron news, but inflation concerns also dominated headlines as the week started. These developments, along with relative dollar strength have all affected bullion prices. With multiple drivers and price action, gold volatility was higher as the week started. Gold started the week near $1,792 an ounce, while silver was closer to the $23.27 mark.

With inflation persisting, newly re-appointed Fed Chair Jerome Powell was set to testify before the Joint Economic Committee in Washington D.C. regarding monetary policy and the Fed’s economic outlook. Powell outlined the prospect of slowed economic growth amid a new Covid variant. The Fed Chair also mentioned retiring the term “transitory” as it pertains to inflation.

It’s no secret amongst investors and regular Americans that inflation has persisted. However, some were surprised to witness Powell’s pivot away from the term, along with his more hawkish tone. In an effort to combat inflationary pressure, Powell stated that tapering could end, “a few months sooner” than expected. 

On the heels of such a testimony, it wouldn’t be a surprise to see more discussion of stagflation as economy recovery and inflation concerns remain in the headlines. This debate is often supportive of gold. However, that has not been the case in the near term. 

Following Powell’s testimony, government bond yields rose, while metals and stocks both fell. Historically speaking, tapering, and talks of tapering have preceded stock market volatility. Some were surprised to see a dip in metals prices as well. On Tuesday, gold fell to the $1,770 mark, while silver remained near $22.90. 

By this morning, all eyes were on Nonfarm payroll and unemployment data. The case for a slowing economy was supported, as payrolls increased by a mere 210,000 compared to the expectations of 573,000. Despite the huge miss in payrolls, gold and silver stayed steady around $1,770 and $22.40, respectively. The disappointing payroll data was seemingly offset by a decrease in the unemployment rate from 4.6% to 4.2%. 

As of now, gold is looking at a 1.2% weekly slide. As this is written, silver is down closer to $22.04, which would be a 5.4% drop. Despite a Friday morning rally, stocks are also down for the week. Investors will have to weigh Omicron hysteria along with the prospect of a faster tapering timeline when determining risk appetite in the coming weeks. 

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