Gold and Silver See Weekly Gains Amid Lower Yields and Fed Ambiguity

APMEX

10/7/2022 3:19:17 PM

Once again, gold and silver prices were largely driven by movements in Treasury yields and the dollar index, as well as bets on Fed monetary policy. For investors betting on Fed policy, the focus for this week remained on economic data, as many believe that the health of the U.S. economy will ultimately determine Fed policy regarding rate hikes.

 The first round of economic data came on Monday via the Institute for Supply Chain Management (ISM) manufacturing index, which showed a slowing in manufacturing activity to 50.9% - its lowest point since April of 2020.

 Fears that continual rate hikes will further weaken the U.S. economy drove Treasury yields lower on Monday, which allowed gold to extend last week’s gains.

 As a result, gold rose by 2.2% to a closing price of $1,698. On the same day, silver gained nearly 9% on its way to the $20.81 mark. Stocks rallied on Monday as well, with the Dow Jones Industrial Average and S&P 500 both gaining nearly 2.8%.

 The dollar and Treasury yields continued their retreat into Tuesday, which pushed gold to a three-week high of $1,721. Hopes that the Fed would soften its rate hike cycle drove stocks higher again on Tuesday, as the Dow, Nasdaq, and S&P 500 all surged by around 3%.

 The dollar edged higher on Wednesday, which pressured gold and silver. Both would pare losses and end the day little-changed at $1,723 and $20.82, respectively. U.S. equities also saw little change on Wednesday, as investors were looking ahead to Thursday's jobless claims data, and Friday’s non-farm payroll news.

 Thursday’s jobless claims revealed a higher-than-expected number of 219,000. U.S. stocks plunged following the news, while the dollar index inched higher. Gold and silver remained steady throughout Thursday, as the latest round of economic news did little to clarify the Fed’s approach.

 The Labor Department released their monthly jobs report this morning, which showed a modest increase in non-farm payrolls to 263,000 when 255,000 was forecasted. Many believe this data will not deter the Fed from pursuing additional rate hikes. 

The result was pressure for precious metals as silver fell by over 2%. Meanwhile, gold declined slightly to around $1,710 an ounce. Stocks also fell following the news, as the Dow Jones fell by 500 points, while the Nasdaq slipped 2.7% lower.

 Despite the positive payroll news, gold is hovering near $1,703, which is 2.4% higher for the week. Silver is currently near $20.22 an ounce, which if maintained would be a 5.2% gain. Unlike last week in which the pair saw a divergence, both are likely to solidify gains this week, with lower Treasury yields, safe-haven buying, and Fed ambiguity all supporting gold and silver.