Gold and Silver Drop as the Fed Affirms Hawkish Stance and Stocks Rise

APMEX

6/24/2022 2:15:00 PM

It was a shortened trading week as major markets were closed on Monday, in observance of the Juneteenth Holiday. After plummeting by nearly 6% last week, the S&P 500 jumped by 2.5% on Tuesday, while other indices such as the Nasdaq Composite rose by 2.4%. 

Despite a dollar pullback, the price of gold saw little change on Tuesday, as the yellow metal started the day near $1,840 an ounce and would end the day closer to $1,829. The slight pullback is attributable to higher yields, as the 10-year Treasury yield jumped to 3.3% on the same day. Silver also saw little change on Tuesday, with prices remaining near $21.60 throughout the day. 

Investors were looking to Fed Chair Jerome Powell’s semi-annual congressional address on Wednesday in which he was expected to outline Fed action in the face of 40-year high inflation, and potential effects of such action on the U.S. economy. 

U.S. equities whipsawed between gains and losses on Wednesday but would end the day slightly lower as investors listened closely for clues on Fed action. During his testimony before the Senate Banking Committee, Powell reaffirmed the central bank’s commitment to taming inflation. Notably, Powell said that achieving a soft landing or avoiding a recession is now “significantly more challenging.” 

Additionally, Powell stated that there is a growing need for better regulatory framework surrounding crypto markets. Following these remarks, Bitcoin briefly dipped back below $20,000. Metals also saw mild pressure on Wednesday following the reaffirmation of more hawkish Fed policy. Gold and silver both touched one-week lows on Wednesday of $1,823 and $21.26, respectively. 

Despite fears of a recession and another higher-than-expected jobless claims number, stocks in the U.S. saw modest gains on Thursday, which put equities on track for a weekly gain. While recessionary fears supported bullion intrigue, relative dollar strength weighed on precious metals, leaving gold almost unchanged at Thursday’s close, near $1,823, while silver was slightly lower at $21.01 an ounce. 

As this is written, stocks are on track to snap their three-week losing streak. Currently, the Dow Jones Industrial Average is 4.1% higher while the S&P 500 and Nasdaq are both just over 3% higher for the week. 

Despite today’s dollar decline, gold and silver are still lower as risk appetite inched higher towards the week’s end. Silver briefly touched a five-week low this morning of $20.77 an ounce. Currently, silver is near $21.20 which is 2.2% lower for the week. As this written, gold trading at $1,829, which would be a 0.7% weekly decline. Despite growing fears of a recession, the prospect of higher interest rates and a slightly improved risk sentiment have seemingly contributed to lower gold and silver prices for this week.