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Gold and Silver Fall Despite Risk Aversion
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Gold has enjoyed three consecutive weekly gains, driven in part by risk aversion related to the banking sector, and hopes that the Fed may pause its rate hike campaign. This week, investors were focused on debt ceiling negotiations in the U.S., corporate earnings news, and inflation data.
Gold was modestly higher on Monday, with a closing price near $2,027, following Friday’s losses. Silver started the week near $25.50 and would see little change through the beginning of the week.
Caution drove stocks down on Tuesday as investors awaited updates from debt ceiling negotiations between President Biden and House Speaker Kevin McCarthy. Meanwhile, the U.S. faces over $31 trillion in gross federal debt.
On Wednesday, gold touched its weekly high of $2,046 as debt concerns continued to dent risk appetite. U.S. equities were mixed on the same day, as inflation data showed that consumer prices rose 0.4% from March to April. Price increases were largely in line with expectations, which supported the idea that the Fed may indeed pause rate hikes in June.
On Thursday U.S. jobless data was released, which showed that the number of Americans filing unemployment claims jumped to a 1-1/2 year high last week. This news, along with mixed corporate earnings and continued banking concerns, led to another mixed day on Wall Street. After some initial gains, gold would ultimately shed 0.9% on Thursday, to a closing price near $2,011 an ounce. Silver ended Thursday over 5% lower at $24.03, as the safe-haven dollar gained, pressuring bullion to the downside.
Mounting concerns over the U.S. economy, debt, and regional banks drove stocks lower again this morning. Currently, the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite are all on track for weekly losses. The Dow is leading in that category, with what is currently a 1.7% weekly downturn.
So far, the dollar has benefited from weekly safe-haven inflows, touching a 1-month high of 102.70 this morning. This, along with an uptick in bond yields pressured gold and silver lower again and will likely end the pair’s three-week winning streak. Currently, gold is near $2,014 an ounce, which would be a 0.6% weekly loss. Meanwhile, silver is eying a 6.2% weekly drop at $23.92 an ounce.
