May 28th Market Update
All Eyes on Inflation Data
Gold started the week off close to a 4-1/2 month high, near $1,885 an ounce. Still boosted by a crypto sell-off, inflationary concerns, and a weaker dollar, gold looked to solidify its appeal as a reliable safe-haven asset. We would see continued gold momentum heading into Tuesday as the dollar (DXY) would slide to over a four 4-1/2-month low near 89.5.
By Wednesday, gold would climb to a four-month high near $1,910. This, after more dovish language from the Fed in deeming recent inflation signals as “largely transitory” in nature. These comments drove the yield on 10-year Treasury notes down to two-week lows. Like last week, gold would see its weekly peak on Wednesday.
On Thursday, gold would experience downward pressure via a dollar uptick, which can suggest inflation jitters on behalf of traders who noted the mere mention of tapering. After all, Vice Fed Chairman Richard Clarida did state that, “We are talking about talking about tapering.” Jobless claims also fell more than expected, which would further pressure gold to levels closer to $1,894.
The same factors that supported gold throughout the week would also give silver bulls reason for celebration. Silver would see an intraday high near $27.88 on Monday, amid the same declining dollar that benefited gold. Additionally, silver had support from declining 5-year Treasury yields and continued crypto outflows.
Silver would also see its weekly peek on Wednesday, as it neared the $28.21 mark. Silver prices would decline, to around $27.55, driven down by rising Treasury yields. Currently silver is sitting near $27.75 an ounce, which suggests the metal may be range-bound in the near term.
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Gold bulls remained cautious while key inflation data was released today. The Core PCE price index rose 3.1% year over year, which was more than the forecasted 2.9% rise. Some have speculated that this could lead to more taper talk on behalf of the fed, which can also bolster yields and pressure gold. As this is written, gold is hovering around $1,898 an ounce.