Gold & Silver Pare Losses Amid Lingering Inflation

APMEX

10/1/2021 12:02:31 PM

Gold & Silver Cut Down Losses Amid Lingering Inflation

Wall Street was mixed as the week began. Although the Dow, S&P, and Nadaq were all slightly up last week, September has maintained its reputation as a historically bad month in the stock market. Durable goods orders rose by 1.8% on Monday. This was much higher than the forecasted number of 0.6%, driving some indices up, resulting in a mixed finish on Wall Street.

Gold ticked up in early morning trading on Monday reaching $1,760, before declining modestly to $1,750 as the day ended. Silver started the week near $22.35 and would touch a weekly high of $22.80 on Monday afternoon. Investors braced to see how markets would react to Fed Chair Jerome Powell’s testimony before Congress on Tuesday. 

Powell was to address the Fed’s economic response to Covid-19 shutdowns, which have plagued the economy for nearly a year and a half. The Fed Chair testified that the core drivers of inflation are still in place and will be for longer than expected. Citing supply chain woes, Powell stated that “Inflation is elevated and will likely remain so in coming months before moderating.”

Market sentiment was more cautious on Tuesday following Powell’s remarks. Stocks dove as markets were faced with the prospect of lingering inflation and potential tapering. The S&P 500 slid 2%, which would be its worst one-day decline since May. Rising yields also pressured stocks to the downside, as investors sold bonds in anticipation of Fed tapering. 

Metals would also dip on Tuesday. At one point silver slid by 1.7%, only to bounce back to the $22.48 level to end the day. Gold followed a similar pattern, with an initial drop of 1.2%. The yellow metal would pare some of its losses, ending the day around $1,734.

The Dollar Index (DXY) reached an 11-month high on Wednesday, which further pressured bullion, especially silver. Silver fell by as much as 4.8% reaching its lowest level since July of 2020. Gold fell slightly and ended the day around the $1,728 mark. 

Thursday saw gains for both gold and silver. Higher-than-expected jobless claims and a dollar dip drove gold up by 1.3% to $1,752. Silver gained 2.4% on the same day, while stocks tumbled again. The S&P 500 closed its worst month since March of 2020, while the Dow also ended on a sour note, down by 4.3%. This would mark its worst month in 2021. 

Core inflation data released this morning was slightly higher than forecasted, hitting a fresh 30-year high. Yields also dropped this morning, paving the way for some gold momentum. The yellow metal was able to gain ground that was lost this week and is currently near $1,760 an ounce. Silver also saw a boost and is currently hovering around $22.46 an ounce. 

While both metals were able to somewhat recover from weekly declines, neither would fare well for the month. Silver ended the month down more than 7% while gold lost nearly 3%. Gold and silver bugs will pay close attention to movements in yields and the dollar. Some analysts are concerned that Fed tapering could greatly diminish the appeal of bonds, driving yields upward. This can also mean more downward pressure for precious metals.