Gold Eyes Weekly Gains Despite Stronger NFP Data


For investors, the broad focus and anticipation was on the Fed’s two-day meeting which started on Tuesday. Investors hoped to hear some specifics regarding tapering, or the reduction in emergency bond buying, as well as an outlook for potential interest rate increases. There was also an expectation that Fed Chair Jerome Powell would address rising prices, as inflation remains near a 30-year high. 

Before the Fed meeting, Monday marked the first day of November trading, and would see positive movements for US stocks. The Dow Jones Industrial Average, Nasdaq Composite, and S&P 500, all saw enough gains to lead them to individual closing records. Momentum on Wall Street was supported with gains by Ford, Tesla, and Boeing. 

Meanwhile, gold and silver didn’t see significant price movements on Monday, starting the week near $1,781 and $23.80, respectively. Last week, silver lost 1.5% as it fell victim to selling, and concerns that price appreciation could be hampered by slowing industrial growth in the US and in China.

Silver encountered an old foe once again this week, in the dollar. Greenback gains on Tuesday drove silver prices down by more than 2.5%. Gold was spared from significant downturns on Tuesday, ending the day around $1,787.

The highly anticipated Fed meeting came, and heading into Wednesday Fed Chair Powell addressed some of the aforementioned points. Powell confirmed that a reduction in bond-buying was set to occur, “later this month.” The initial reduction will be $15 billion per month. For reference, the current rate is closer to $120 billion monthly, with higher rates seen in the first months of the pandemic. 

Powell also acknowledged higher inflation but continued to attribute current inflation rates to transitory factors such as supply chain issues. The Fed Chair stated that he expects prices to run higher into the summer of 2022 but has yet to see concerning wage increases. 

Powell failed to provide a specific timeline for rate hikes, stating that certain economic conditions, such as full employment, have not been met. The stock market welcomed the news, as The Dow Jones and Nasdaq closed at record highs on Wednesday. 

Gold prices were pressured on Wednesday afternoon, with a drop at one point of 1.4%. Following the Fed announcement of tapering, Treasury yields rose, which also pressured gold. Silver also experienced significant pressure on Wednesday, falling to the $23 level, before recovering to $23.60 before Thursday.

While both metals saw short-term pressure following the Fed meeting, it seemed that rate hike patience, and slipping yields, would provide support to bullion ahead of this Friday’s non-farm payroll report. This report is often a significant factor in how gold prices perform, especially in recent months where economic recovery remains at the forefront of investors' minds. 

Today’s employment data revealed a drop in the unemployment rate to 4.6%. Major US indices once again surged to record highs following the positive employment data.

Gold and silver seemingly shrugged the news off, as they both look to make weekly gains. As this is written, silver is near $23.98, while gold is at $1,805 an ounce. This would mean a 1.4% gain for the yellow metal. As the week closes, it’s clear that positive jobs data was not enough to deter gold gains amid lower yields and delayed rate hikes. 

Back to Insights