Precious Metals Slide Despite Recession Fears
It was a shortened trading week in the U.S. as major markets were closed on Monday, in observance of the Independence Day holiday. Investors were anticipating multiple scheduled events throughout this week with Wednesday’s release of the Fed’s June meeting minutes, Thursday’s jobless data, and Friday’s nonfarm payroll data, topping the list.
Gold started the week at $1,808 an ounce, while silver was closer to $20.19. Recession concerns were prevalent on Tuesday, as the 10-year and 2-year Treasury yields inverted, which has historically preceded a recession. However, the dollar remained the favored safe haven asset as the dollar index remained near multi-decade highs.
Given the dollar’s favor, gold saw immediate pressure as the trading week started, and would shed 2.4% on its way to $1,764 an ounce. Silver would also succumb to a stronger dollar, dropping below $20 for the first time in two years.
U.S. equities started the week off on shaky ground but would rally Tuesday afternoon ahead Wednesday’s FOMC minutes. Wednesday came, and with it further bottoms for precious metals. While the dollar continued to rally, gold touched lows not seen since September of 2021, of $1,732 an ounce. At the same time, silver continued to languish at two-year lows just below the $19 mark.
Wednesday’s Fed minutes outlined the central bank’s resolve to pursue higher tighter policy, despite risks to growth. In their June meeting Fed officials stated that another interest rate increase of 50 to 75 basis-points was likely to occur at the July meeting. This meeting is set to take place on July 26th-27th.
In the same meeting Fed officials made clear that even tighter monetary policy may be pursued if inflation fails to slow. There was also concern over further slowdowns to economic growth, as consumers continue to realize the effects of lingering inflation.
Despite the gloomy tone captured by the FOMC minutes, stocks rallied following Wednesday’s release. The S&P 500 would rise for the third consecutive session, while the Nasdaq Composite and Dow Jones Industrial Average rose 0.38% and 0.22% respectively.
The dollar rally paused on Thursday, which paved the way for precious metals to make modest gains. Gold would end the day at $1,742 while silver closed at $19.23 an ounce. Thursday’s jobless claims exceeded forecasts, rising to six-month highs. Despite this news, stocks in the U.S. bounced. Most notably, the S&P 500 solidified a four-day winning streak while the Nasdaq Composite gained almost 3%.
The positive jobs news and surging dollar index both weighed on gold, as the yellow metal dipped to $1,742. This would be a 3.6% weekly loss for the yellow metal. Silver is also under pressure, and is currently at $19.30 an ounce, which is 4.4% lower for the week.