Gold and Silver Eye Modest Gains as Investors Digest Economic Data

It was a shortened trading week with markets in the U.S. closed on Monday in observance of the Memorial Day Holiday. Tuesday brought with it whipsawing equities, resulting daily losses. Tuesday also marked the end of a turbulent month in which major Wall Street averages fought to stay out of bear market territory.

Gold price movement was conflicted on Tuesday. The yellow metal enjoyed some support from investors fearing global growth slowdowns and a recession. On the other hand, gold prices were pressured as the dollar firmed and yields climbed higher. 

Most notably, yields on the ten-year Treasury note jumped to 2.87% by Tuesday’s close. As a result, gold fell by 0.7% on its way to $1,835, while silver shed 1% ending the day near $21.56 an ounce. Fed action in the wake of inflationary concern remains a major factor in determining investor sentiment. This being so, monetary policy cues from the central bank often precede momentum changes in broader markets. 

The Federal Reserve’s Beige Book, which is essentially a compilation of economic commentary from each of the twelve Fed districts, was released on Wednesday. This report affirmed risk-off sentiment for some investors, as it outlined economic slowdown in parts of the country, coupled with a continuation of higher prices.  

While Wall Street started a new month on Wednesday, the aforementioned concerns continued to weigh on growth stocks, resulting in a pullback for the S&P 500 and Nasdaq Composite of 0.9% and 0.7% respectively. Investors continued to favor bonds which again resulted in higher yields. Despite an initial drop, gold ended the day 0.7% higher, at $1,849. On the same day, silver prices rose by 1.3% ending the day near $21.82. 

Metal momentum continued on Thursday as Treasury yields and the dollar both eased from recent highs. This paved the way for gold to touch a three-week high of $1,873 and a weekly silver peak just above $22.30. Meanwhile, Thursday’s initial jobless claims data showed a drop to 200,000, which was the lowest level on record. Skeptics of this data cite low labor market participation as a contributing factor. 

Stocks were higher on Thursday, with tech shares leading the way. The tech-heavy Nasdaq Composite was 2.5% higher by the end of trading on Thursday. Throughout much of 2022, major cryptocurrencies such as Bitcoin have shown some correlation to some major stock market averages, especially the Nasdaq Composite. A decoupling occurred yesterday, as Bitcoin briefly dropped below $30,000 while bearish sentiment prevailed in the crypto space. Bitcoin is down by nearly 38% year-to-date.

 Gold bugs looked to Friday’s release of Nonfarm payroll data to build off Thursday’s momentum. Bullion would not find momentum there, as Friday’s data showed that the U.S. added 390,000 payrolls when the forecast was closer to 325,000. 

Despite the better-than-expected payroll data, stocks were lower this morning. For the time being, it seems inflation and recession fears are limiting Wall Street momentum and buoying safe-haven assets. Once again, investors piled into bonds as the week closed, leaving the 10-year Treasury yield near 2.98%. 

As this is written, gold is hovering near the $1,858 mark which is modestly higher for the week and higher for the second consecutive week. Silver is currently looking flat, just above $22 an ounce.