Silver Slides as Gold Gains on Safe-Haven Demand


Last week, gold managed to secure its fourth consecutive week of gains on dollar weakness and hopes of a more dovish Fed. This week was shortened in terms of trading days, as The New York Stock Exchange and the bond market were closed on Monday in observance of Martin Luther King Jr. Day. For the remaining four days investors were faced with Fed speak, corporate earnings, jobless news, and housing data. 

In previous weeks, gold has been the beneficiary of lower yields, a weaker dollar, and hopes that the Federal Reserve may pursue a less aggressive rate hike pace. On Tuesday, gold was hovering near an 8-month high of $1,914 while silver started the trading week at $24.29.

Worse-than-expected earnings data from banks such as Goldman Sachs weighed heavily on U.S. equites throughout Tuesday, resulting in a mixed close on Wall Street. The dollar regained some ground on Tuesday, which meant that the gold rally would take a pause. While the dollar index inched higher by about 0.3%, gold saw a modest decline to $1,908 on Tuesday, while silver fell by 1.5% to $23.92.

On Wednesday, the Fed’s Beige Book survey was released. The Beige Book is comprised of anectodical economic information from each of the Fed’s twelve district banks. Six districts noted no changes or moderate declines in economic activity since their last reporting period, while many districts reported signs of easing inflationary pressure. It was noted that most districts expect “little growth in the months ahead.”

Retail sales data was also released on Wednesday, which revealed that U.S. retail sales fell by the most in a year, in December. Retail sales data, along with disappointing earnings news weighed heavily on investor sentiment Wednesday. As result, The S&P 500 dipped to its lowest level in over a month, while the Dow Jones Industrial Average slipped by 1.9%.

On the same day, gold touched a weekly low of $1,896 amid selling pressure and dollar momentum. Meanwhile, the Bank of Japan announced that it would maintain its low interest rates and bond yield cap, despite expectations the central bank would pivot amid inflationary woes.

Gold’s best day of the week came on Thursday, as the yellow metal gained 1.4% to a weekly high of $1,931. Gold’s upward momentum was largely fueled by safe-haven inflows amid weak U.S. economic data. While gold rose on Thursday, stocks in the U.S. tumbled despite unemployment filings in the U.S. falling to their lowest point since September. 

While signs of a more resilient job market were encouraging to some, investors were wary about weak corporate earnings and the effects of more rate hikes on an already weakened U.S. economy. Currently, U.S. equities are on track for their first losing week in three. The Dow is leading in that category, with what is currently a 2.7% weekly drop. 

On the crypto front, the FTX collapse has claimed its latest victim as Genesis Trading filed for bankruptcy. Despite turmoil in the cryptocurrency space, Bitcoin has managed to rally above $21,330, which is 2.2% higher for the week. 

Gold continued to benefit from safe-haven demand on Friday, as the yellow metal surged back up to a 9-month high above $1,934, which is 0.7% higher for the week. This would be gold’s fifth straight week of gains. As this is written, silver is near $23.84 an ounce which would be a weekly drop of 1.8%.

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