Precious Metals and Stocks Gain on Inflation Data and a Dollar Decline

APMEX

11/11/2022 12:52:29 PM

Last week gold was able to snap its three-week losing streak amid a slowdown in the dollar rally and better-than-expected payroll news that for some, boosted hopes that the Fed may consider easing its current pace of monetary policy tightening. For this week, investors were keenly focused on Tuesday’s U.S. mid-term elections along with CPI data, which was set for release on Thursday. 

Gold and silver were flat on Monday near $1,670 and $20.55. Monday saw a second straight day of gains for major Wall Street averages, with the Dow Jones Industrial Average gaining the most at 1.4%. 

The dollar index slid by 0.6% on Tuesday, as U.S. mid-term elections began, while Treasury yields also inched lower. Precious metals took advantage of the dollar dip, as gold jumped by 2.4% and silver by 3.6%. It was widely expected that Republicans would win control of the House of Representatives and possibly the Senate. However, the latter seemed less likely as the day progressed. 

Meanwhile, stocks in the U.S. rose for their third consecutive session on expectations of congressional gridlock.  Gold and silver saw little movement on Wednesday, as investors were looking ahead to Thursday’s CPI news. The pair would end trading around $1,710 and $21.15.

In a typical election, the results would already be known, but the results were not clear as the day drew to a close. With little clarity on which party would control congress, selling took place on Wall Street, which weighed on major averages. By the end of trading, the Nasdaq Composite had fallen the most at nearly 2.5% followed by the S&P 500 with losses of 2.1%. 

On Thursday, news broke that the consumer price index for October rose by 0.4% against forecasts of 0.6%. Some interpreted this as a sign that inflation in the U.S is beginning to ease, after stubbornly remaining near 40+ year highs. Meanwhile, yearly CPI touched 7.7% when 7.9% was expected.

Despite little to no indication from Fed officials of a pivot, many believe that the latest round of inflation data could mean a slowing of the current pace of rate hikes. This sentiment, along with a massive dollar decline drove gold 2.8% higher to a two-month peak of $1,759 on Thursday. Silver also gained on the news, ending the day nearly 3% higher at $21.73. Meanwhile, the dollar experienced one of its worst days in over twelve years on Thursday, shedding 2.2% against its rivals. 

Despite a slight uptick in jobless claims, Wall Street sentiment was boosted amid the inflation news, which meant one of the largest stock market rallies in two years. By the end of Thursday’s trading the Nasdaq Composite had solidified a 7.4% gain, while the S&P 500 and Dow Jones Industrial climbed by 5.4% and 3.8% respectively. 

The greenback slide was extended into this morning, as the currency had fallen by over 3% over the last three days. As this is written, gold is continuing its climb on the dollar decline. As of now, gold is 5.4% higher for the week at $1,762 an ounce. Meanwhile, silver is eying a 4.6% weekly gain, as the metal hovers near the $21.48 mark.

While the U.S. bond market is closed in observance of Veterans Day, the stock market is open. At the time of writing, all three major indices a trading higher, and will likely have their best week in over four months.