Gold and Silver Dip Following FOMC Meeting, Dollar Gains.

APMEX

1/28/2022 12:10:47 PM

Metals started the week off on solid footing, with gold near two-month highs around $1,835. Silver started the week near $24.20 an ounce. At that time, metals had support from a weaker dollar, geo-political woes, and broader market volatility.  

Meanwhile, another rough open was anticipated on Wall Street after U.S. stocks finished their worst week since March of 2020. While the equities sell-off was steep, major indices such as the Dow and Nasdaq were able to rally back into the green for Monday. 

Gold saw its weekly high of $1,853 on Tuesday, as investors anticipated Wednesday's FOMC policy meeting and press conference. Many wondered if the Fed would provide clarity regarding rate hikes or balance sheet reductions. Some wagered that Powell would strike a more dovish tone in response to volatile Wall Street trading.

On Wednesday, Fed Chair Jerome Powell briefly addressed upside inflation risks when he said "There’s a risk that the high inflation we are seeing will be prolonged. There’s a risk that it will move even higher. "

Powell confirmed 2022 rate hikes and an end to pandemic-era asset purchases. It is expected that there will be five interest rate hikes in 2022. 

The Fed Chair gave few specifics regarding balance sheet reduction. However, a post-meeting statement was released which stated that Fed balance sheet reductions would occur following interest rate increases.

After the meeting, Gold fell by 1.4% to $1,821. Silver initially held firm, but would also fall by over 1% on Wednesday. 

Thursday would see a continuation of volatile stock market trading, as investors digested the Fed's recent confirmation of 2022 rate hikes. Gold and silver extended losses on Thursday, as a stronger dollar pushed the metals down to fresh weekly lows of $1,792 and $22.55 respectively. 

Crypto woes continued, as Bitcoin dropped to $36,695 on Thursday. So far, Bitcoin has suffered a fate similar to other risky assets in 2022, as pandemic-era easy money comes to an end. Bitcoin is currently down by more than 22% YTD. 

As Friday began, the stock slump continued. The Nasdaq and S&P 500 both stayed in correction territory, 17.2% and 10.1% lower than their respective highs. 

Gold is headed for its worst weekly decline since November, as the yellow metal sits near $1,784 an ounce. Dollar strength also plagued silver, which is currently near $22.21, down 7.4% for the week.