Gold and Silver Eye Weekly Gains as the Dollar Eases

APMEX

5/27/2022 2:11:03 PM

Last week, gold and silver managed to snap a four-week losing streak as investors were faced with an increasingly bearish equities market. Fears of a recession drove investors into safe-haven assets, while major stock market indices were faced with more than two months of consecutive weekly losses. Meanwhile, the S&P 500 was nearly 20% lower than its record highs, as it briefly dipped into bear market territory on Friday. 

Cautious investor sentiment still prevailed as this week began. Investors anticipated events on the economic calendar such as new home sales, FOMC meeting minutes, jobless claims, and inflation data for a better picture of U.S. economic health and direction on Fed monetary policy.  

Gold gained 0.8% on its way to $1,864 on Monday, as the dollar slipped from 20-year highs. Silver started the week at $21.87 but was little changed Monday. Bullion gains were seemingly capped by higher Treasury yields. Stocks were slightly higher on Monday as well, as the S&P 500 jumped by 1.8%. 

Tuesday saw more stock market volatility as the tech-heavy Nasdaq fell by 2.5%. Losses in the category were led by Snap, the social media company and parent corporation of the social media platform Snapchat. Snap stock closed 43% lower, following news that the tech company was going to miss target revenues. 

More bad news came on Tuesday via housing data, which revealed that new home sales plummeted by 16% in April. This, coupled with Wall Street volatility prompted investors to seek the relative safety of bonds, driving the 10-year Treasury lower to about 2.72%. Gold would also benefit from flight to safety, as the yellow metal touched its weekly high of $1,869. At the same time, silver was able to breach the $22 mark, touching $22.16 an ounce. 

Minutes from the Federal Reserve’s May meeting were released on Wednesday, which revealed that a majority of Fed officials see it necessary to raise interest rates by 50 basis points, in an attempt to slow record inflation. Stocks bounced following the release of the FOMC minutes, while gold dropped to $1,844, which was 1.2% lower than its weekly peak. 

Thursday saw a continuation of momentum on Wall Street, as some major indices fought to stay out of bear market territory. Most notably, the Nasdaq Composite was almost 3% higher. Meanwhile, confirmation of hawkish Fed policy pressured bullion. Gold and silver remained buoyed by recession concerns, so the two were little changed on Thursday, closing at $1,852 and $22.01, respectively.

The dollar slid from recent highs again this morning, which boosted silver prices to three-week highs near $22.36. If silver can maintain, it would end the week 2.2% higher. As this is written, gold is hovering near $1,855 an ounce. While gold is only slightly higher on the week, both metals are on track to secure two consecutive weekly gains. 

More inflation data was released this morning via personal consumption expenditures, or PCE data. PCE inflation in April was in line with forecasts of a 0.2% gain. Some investors interpreted this as a slowing in inflation. This news paved the way for Wall Street optimism and the potential for The Dow Jones and S&P 500 to end their losing streaks of eight and seven weeks, respectively. This would be significant, as according to Bloomberg data, last Friday marked the Dow’s longest losing streak since 1923.