Gold Eyes Weekly Gains as the Dollar Firms and Inflation Surges

APMEX

6/10/2022 12:52:21 PM

The week began with a cautiously optimistic mood on Wall Street following Friday’s better-than-expected payroll data, which revealed that the U.S. added 390,000 new jobs in May. This exceeded forecasts of 325,000. The positive payroll news resulted in just enough momentum for major indices such as the Nasdaq Composite and S&P 500 to achieve modest gains of 0.45% and 0.29% respectively on Monday.

 Meanwhile, gold was mostly flat near $1,845 as Treasury yields climbed higher. The benchmark 10-year Treasury yield made its way past the key 3% mark. Despite this, silver was able to gain 2.4% and would end the day just below $22.50 an ounce. 

 Stocks rose slightly again on Tuesday. However, momentum was seemingly limited by investor concern that continued Fed interest rate hikes may push the U.S. economy into a recession. Bond yields dropped on Tuesday, while the dollar index touched 3-week highs near 102.66. Despite this, gold was marginally higher at $1,854 by Tuesday’s close. 

 Investor caution permeated markets on Wednesday, ahead of key economic news in Thursday’s jobless claims and Friday’s inflation data. Fears of a slowing economy and persistent inflation drove equities lower, snapping Wall Street’s two-day winning streak. Most notably, the S&P 500 slid by 1.2%. 

 At the same time, gold pushed 1.2% higher but was kept in check at levels just below $1,860. While inflation concerns supported gold gains, the yellow metal has historically been sensitive to interest rate hikes, more of which are expected to be announced next week.  

 Investor concern as affirmed on Thursday when U.S. jobless claims accelerated to 229,000 in June, which was significantly higher than estimates which were closer to 205,000. This marked the highest level of such claims in the U.S. in more than five months. Stocks fell sharply following this news, with the Nasdaq Composite shedding 2.8% and the S&P 500 losing 2.4% by the end of trading. 

 Amid stock market turbulence, gold was still kept in check by higher Treasury yields and a surging dollar index. Gold ended Thursday’s trading slightly lower, at $1,845. At the same time, silver was trading 2.2% lower, at $21.56 ahead of Friday’s highly anticipated CPI data. 

 Friday’s inflation news revealed a fresh 40-year high for consumer prices, of 8.6%. Following today’s inflation release the dollar index surged, touching one-month highs above 104.02. This, and the likelihood of rate hikes in the face of red-hot inflation initially weighed on both gold and silver. 

 Stocks also fell sharply following this morning’s inflation news, as the S&P 500 and Nasdaq had both shed nearly 1.8% within 30 minutes of the CPI data being released. 

 While gold and silver initially fell following this morning’s inflation news, both have since rallied. As this is written, Gold is at $1,858 an ounce, which is 0.7% higher for the week. Silver is currently near $21.82, which is barely lower. Currently, it looks like both metals will end the week flat, or marginally higher.