Inflation Nears 40-Year High as Gold Trades Sideways


Omicron fears, Fed policy, and inflation were just a few of the market drivers that were present as we kicked off another week. U.S. Stocks rallied on Monday as some investors digested concerns related to Omicron, which plagued markets last week. Gold and silver prices were little changed around $1,783 and $22.55, respectively as the week began. 

Bitcoin losses accelerated over the weekend, dropping by another $10,000 on Saturday. Bitcoin saw a slight uptick on Monday to $51,000 but has since plummeted back to 2-month lows near $48,000. Some analysts contend that the move signals that investors are experiencing a decreased risk appetite. 

A significant pivot is also underway, as the Fed seems increasingly hawkish, citing concerns that new Covid variants may aid in accelerating inflation rates. Several Fed officials have stated that a doubling of its taper to $30 billion a month may come as soon as December. Investors are looking to next week’s Fed meeting for confirmation on this, as well as rate hike clues for 2022. 

Investors seemed to shrug off Omicron fears as the stock market rallied further on Tuesday. The Nasdaq and S&P both had their best days since March, rising 3% and 2% respectively. This rally continued through Wednesday. 

Like stocks, Treasury yields were also pushed down last week, but rallied through Wednesday as well. This, along with dollar strength weighed on metals, caused gold to dip to $1,772 on Tuesday. However, reality would set in as investors began looking ahead to Friday’s consumer price data. Meanwhile, gold would see its weekly peak of $1,792 by Wednesday, while silver stayed steady around $22.45 an ounce. 

Silver’s most significant price movement came on Thursday, as easing Omicron fears and dollar gains pushed the metal down by nearly 2.5% to $21.88 an ounce. On the same day, major U.S. stock indices broke 3-day winnings streaks, as investors braced for Friday’s inflation news. 

Analysts and investors believe that higher inflation would act as confirmation that the Fed will indeed speed up the taper timeline, and possibly lead to sooner-than-expected rate hikes. CPI data revealed that inflation in November rose to 6.8% year-over-year. This would mark the highest inflation in the United States since 1982.

While the monthly jump in prices was in line with the forecast of 0.5%, Americans have now seen six months of inflation rates over 5%. Some fear that future shutdowns related to virus variants will only exacerbate current supply chain issues, leading to higher inflation. 

It seems some investors expected a rise in prices, as stocks head for Friday gains, and a winning week, even after today’s inflation news. Gold initially dipped after today’s CPI data but has since recovered to around $1,784 at the time of writing. This would mean little weekly change for the yellow metal, after three straight weeks of losses. Silver also dropped as the day started, but is currently around $22.14, which is 1% lower on the week. 

Back to Insights