Gold & Silver Shine Amid Rising Tensions, Volatile Markets

Major markets were closed on Monday, in observance of Martin Luther King Jr. Day. The much-needed break came after a rough start to 2022 for U.S. equities. On the bullion side, gold started the trading week near $1,815 an ounce, while silver began the week around the $22.93 mark. 

Since the Fed’s late 2021 hawkish tilt, U.S. equities have dropped while yields have increased in anticipation of higher interest rates. It’s been forecasted that the Fed will pursue four interest rate hikes and reduce its balance sheet over the course of 2022. Fed Chair Jerome Powell is expected to make an official statement on central bank policy next Wednesday, the 26th. 

Tuesday saw a slump in stocks while Treasury yields rose. The Dow Jones Industrial Average had its worst trading day of 2022 on Tuesday, as it fell more the 1.5%. At the same time, metals saw mild pressure, with gold touching its weekly low of $1,806. 

On the same day, crude-oil prices reached their highest since 2014. The spike in prices followed an attack in which explosives were set off at an Abu Dhabi oil facility on Monday. Iran-backed Houthi rebels claimed responsibility for the explosion that took the lives of three people. 

Global tensions increased following Monday’s explosion, while 100,000 Russian troops remained on the Ukrainian border, signaling an imminent invasion. Investors in the U.S. and much of the world looked to President Joe Bidens’s Wednesday press conference, for insight as to how the U.S. and NATO allies may react, if an invasion were to occur.  

The President indicated that sanctions would be imposed on Russia if a full-scale invasion were to occur. Biden hinted that the reaction would be different amid a “minor incursion” vs. a full-scale invasion. The President also stated that the costs would be heavy but ultimately Russia would prevail, if they were to pursue a full-scale invasion.

The President’s comments did little to assuage investor’s geopolitical concerns. Global tensions coupled with record inflation pushed stocks lower again, despite better-than-expected earnings results from banks such as Morgan Stanley and Bank of America. 

Higher yields also plagued equities. The 10-year Treasury yield was at its highest since 2019 on Wednesday, near 1.9%. On the same day, gold gained nearly 1.5% reaching two-month highs near $1,840 an ounce. Silver also benefited from those seeking an inflation hedge as prices jumped over 3%, reaching $24.10. 

Even more bad news came via Thursday’s jobless claims, which showed a jump in initial jobless claims to 286,000. This was higher than the forecasted number of 225,000, and would mark the highest level of jobless claims since October of 2021. Following this, gold and silver both reached their weekly highs of $1,847 and $24.69, respectively. 

By this morning, U.S. equites were on track to end the week lower, while Treasury yields were down for the second consecutive day. For this week and the beginning of 2022, the global equities slump and decline in risk sentiment have paved the way for higher bullion prices. Gold stands to gain nearly 1% on the week, as spot price is hovering near $1,832. Silver is currently near $24.36, which is 6.2% higher for the week.