After falling last week on a stronger dollar, precious metals attempted to take advantage of a pause in the dollar rally as this week began. With last week’s inflation data, and next week’s Fed decision, this week was lighter in terms of scheduled economic events. Investors largely focused on corporate earnings, housing data, and rate hike news from the European Central Bank (ECB), which was set for Thursday.
As the trading week commenced, gold was near $1,709 an ounce, while silver started the week just below $18.70. The pair would seem some intraday gains but would end the day largely unchanged, while the dollar index remained near twenty-year highs.
Despite persistent inflation and recession fears, some major banking institutions such as Bank of America and Goldman Sachs have exceeded earnings expectations. With mixed earnings elsewhere, investor sentiment dipped on Monday, resulting in an equities slide. Most notably, the S&P 500 shed 0.88% before the end of trading on Monday.Tuesday came, and with it an uptick for Treasury yields, amid more positive earnings reports from companies such as Netflix. Riskier assets such as cryptocurrencies also gained some momentum, as Bitcoin touched one-month highs near $24,000.
Meanwhile, precious metals were largely flat. Gold and silver seemed conflicted with support from cautious investors concerned over inflation, while downward pressure came via higher Treasury yields. Treasury yields rose on again on Tuesday, with the gap between the 10-year and 2-year Treasury yields remaining inverted. This occurrence is often viewed as a precursor to a recession.
On Wednesday, gold dipped to a 15-month low of $1,693 ahead of the ECB interest rate announcement. Silver was slightly higher on Wednesday, at $18.76 an ounce. Despite existing home sales in the U.S. falling for the fifth straight month, stocks rallied for the second consecutive day on Wednesday.
The S&P 500 and Nasdaq both ended the day near highs not seen in over a month. The biggest winner was the Nasdaq Composite, with gains close to 1.6% amid renewed confidence in tech shares. Meanwhile, investors braced to see if the ECB would raise rates for the first time in more than a decade.
In an effort to combat inflation in the eurozone, the European Central Bank announced a 50 basis-point rate hike, bringing the key rate out of negative territory, to 0%. This exceeded expectations of a 25 basis-point increase.
Gold was able to recover from relative lows on Thursday, with tailwinds from a softer dollar and negative news on the U.S. economic front. Specifically, data from the Labor Department outlined jobless claims that exceeded estimates again, with the claims seeing 7-month highs above 250,000.
Even gloomier data came via the Philadelphia Fed Manufacturing Index which decreased for the fourth consecutive month, to a reading of -12.3. This index is a measure of manufacturing activity in the region. Manufacturing activity declines in the U.S. have been largely attributable to persistent inflation.
As a result, gold gained 1.6% on Thursday, on its way to $1,720 an ounce. Following a three-day rally, stocks were mixed Friday morning, as major averages eyed weekly gains. As this is written, gold is looking to snap its losing streak and is 1.3% higher on the week, at $1,732. Silver will likely see a modest weekly gain, if its current levels near $18.83 are maintained. Gold gains were boosted by today’s decline in Treasury yields. It is expected that the U.S. Fed will announce an additional rate hike of either 75 or 100 basis-points next week.
