June 7th Market Update

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Gold and Silver Pressured by Dollar Gains, CPI Data in Focus

Last week, U.S. equities would end mostly higher while gold and silver paired losses. The prospect of continued stimulus seemed to boost confidence on Wall Street as the S&P 500 gained 0.6% while the Dow would move up by 0.7%. The week culminated in what many labeled a “mixed” jobs report from Friday morning. Fewer jobs were added than what was forecasted, but wages were up 2% year over year, higher than the predicted level of 1.6%. Many argue this is not necessarily a positive as it could reflect higher prices or inflation. Notably, the yield on the 10-year Treasury note fell to its lowest level since April, around 1.55%.

Gold felt the pressure from a rising dollar and would drop from Friday highs near $1,894 to around $1,886 heading into Monday. Losses so far seem minimal as declining Treasury yields have been supportive. Traders are also operating under the impression that the Fed has delayed taper talks or the prospect of throttling back its buying of assets, given a job report that did not meet expectations.

Silver saw some profit-taking, which took the metal from around $27.82 on Friday to levels around $27.50 earlier today. While the stronger dollar and selling may be pressuring silver, losses have been minimal as we begin the week. Data on consumer credit for April is scheduled to be released this afternoon. Traders will be looking closely at Thursday’s Consumer Price Index (CPI) release. Inflation is expected to continue higher, or more precisely 4.7% year over year.

Currently, silver is around $27.85 an ounce, while gold is closer to $1,889. Gold and silver enthusiasts alike will likely be looking at multiple indicators throughout this week. With continued inflationary concerns, Thursday’s release may be key. As both metals have trended well against declining yields, further drops there may be supportive, especially for gold. A rising dollar index (DXY) continues to be a negative for both metals, so any significant move there may be important for gold and silver bulls throughout this week.


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