Gold Gains as Optimism Shrinks

APMEX

7/9/2021 3:17:24 PM

Gold Gains as Optimism Wanes

Tuesday was the beginning of a shortened trading week and the beginning of declines for stocks, yields, and the dollar. All of this would support gold and silver prices, as silver would see its weekly peak on the same day.

With investors continually evaluating U.S. economic progress, ISM services data and FOMC meeting minutes would be in focus as the potential market-moving scheduled events of this week.

The ISM services index, which is a gauge of service sector growth, came in at 60.1. This was lower than the forecasted number and previous level of 64. Labor shortages were cited as the primary reason for the decline.

The slowing of service sector growth dented confidence on Wall Street. Stocks tumbled on Tuesday as the Dow Jones Industrial Average fell more than 200 points. The S&P 500 also dipped after setting seven consecutive record highs.

The 10-Year Treasury yield also slipped on Tuesday, reaching lows not seen since the beginning of 2021. The dip in investor optimism and waning Treasury yields boosted bullion. Gold reached $1,813 an ounce on Tuesday, while silver saw a weekly high of $26.74 on the same day.

FOMC minutes from the June meeting were released on Wednesday afternoon. Many viewed this as an opportunity to gain insight into how the Fed is gauging economic progress and weighing inflation concerns. Many also thought the minutes would provide insight on a potential tapering timeline. 

Investors did not gain solid direction following the release of the FOMC minutes. With varying viewpoints and some contradictory statements, little clarity was found. However, a majority of Fed officials noted that inflation risks were “tilted to the upside.” There was also no clear timeline given in terms of tapering.

Gold declined slightly but remained steady at $1,805 through Wednesday, while silver dropped to levels near $26.10 amid some selling pressure. Marking a departure from previous weeks, gold and silver diverged slightly, with silver looking at a weekly decline while gold is eyeing a weekly gain, as the yellow metal saw Thursday highs near $1,817.

A sell-off on the cryptocurrency space drove Bitcoin prices down by more than 7% on Thursday. The Thursday sell-off in the crypto market could be representative of an overall decline in risk appetite.

With concerns regarding economic recovery, declining yields, and a softer dollar, the weekly winner looks to be gold, albeit by a small margin. If gold maintains its current levels of around $1,806, it would be a weekly gain of about 0.8%. Silver is currently hovering around the $26.05 mark, which is a weekly decline of 1.8%.