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Precious Metals Fall on Fed Hawkishness
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Last week, gold fell amid hawkish Fed comments while mixed employment news caused uncertainty among investors regarding the Fed’s next move. This week’s calendar of economic events was dominated by Fed speaking events. Nost notably, Fed Chair Jerome Powell was scheduled for two different engagements set for Wednesday and Thursday. Throughout this week, markets were driven by rate hike sentiment, as investors sought clarity on monetary policy.
Gold started the week at $1,984 and would dip to $1,971 on Monday, as Treasury yields inched higher. U.S. stocks also gained on Monday, following their strongest week of 2023. Meanwhile, silver started the week at $23.14 and fell by just over 1% on Monday, amid downward pressure from elevated yields and a dollar uptick.
Gold and silver both fell again on Tuesday, as safe-haven demand for bullion seemed to decline. The pair would end Tuesday’s trading at $1,966 and $22.46 respectively, as losses were limited by a slight downturn in Treasury yields.
On Wednesday, Fed Chair Jerome Powell made remarks at the 100th anniversary celebration of the Division of Research Statistics. While Powell touted the Division’s success in modeling economic data, he also noted challenges in doing so for a post-pandemic U.S. Economy. However, Powell refrained from providing a substantive monetary policy update.
Despite little update from the Fed, gold fell by 0.8% to a closing price of $1,950 on Wednesday, marking its third straight day of declines. Meanwhile, the S&P 500 notched its eighth consecutive day of gains, as risk appetite continued to grow on Wall Street. Simultaneously, the Nasdaq Composite rose barely, but marked its ninth consecutive daily uptick as investors braced for a pause in the Fed’s rate hiking campaign.
On Thursday, Fed Chair Powell addressed monetary policy, and in contrast to dovish expectations, stated that the central bank was not convinced that interest rates were high enough to win the prolonged fight against record inflation. Powell’s remarks were echoed by other Fed officials at sperate speaking engagements on the same day.
The surprisingly hawkish remarks sent the dollar index and Treasury yields higher, while dampening the mood on Wall Street. As a result, the S&P 500 ended the day lower, marking the end to the index’s 8-day winning streak. Gold was up prior to Powell’s remarks but would dip immediately following. However, the yellow metal managed to end its 3-day losing streak at $1,957 an ounce.
This morning, U.S. equities seemingly shrugged off Fed hawkishness, as all three major averages posted gains. As this is written, the Nasdaq Composite is eying the most significant weekly uptick at nearly 2%, while the Dow Jones Industrial Average and S&P 500 are looking at 0.5% and 1.1% respective weekly gains.
Gold’s headwinds persisted this morning, as Powell’s remarks pushed the yellow metal 1% lower. Additionally, waning safe-haven inflows weighed on precious metals. As this is written, gold is at $1,935, which is 2.5% lower for the week. If maintained, this would be gold’s second consecutive weekly decline. Silver also fell further today to $22.21, which is a 4.1% weekly downturn.
