Gold and Silver Diverge Amid Inflation News and Rate Hike Optimism

Last week, gold managed to secure its fifth consecutive weekly gain while silver saw a slight divergence for a 1.8% weekly decline. Bullion prices were steady throughout this week, as gold hovered near nine-month highs while investors parsed corporate earnings news and anticipated inflation data set for release on Friday.

 Gold found some early-week momentum as the dollar index declined by 0.3% on Monday. Rumors that the Fed may opt for an even lower 25 basis-point rate hike at the January 31st policy meeting, drove gold to a higher closing price of $1,934 on Monday. Fed slowdown optimism also drove momentum on Wall Street Monday, as U.S. equities surged higher. The Nasdaq Composite led the rally with a 2.1% gain, as tech stocks led the uptick.

 Gold and silver saw little change on Tuesday at $1,936 and $23.50, respectively. Meanwhile, underwhelming corporate earnings and recession worries drove a mixed close for stocks, as the Dow Jones Industrial Average gained 0.4% on Tuesday, while the Nasdaq and S&P 500 dipped lower.

 S&P U.S. manufacturing and services PMI data from Tuesday was reflective of a slow start to the U.S. economy in 2023, with numbers from each coming in at 46.6 and 46.7, respectively. For these surveys, a number below 50 indicates economic contraction.

 After trading sideways on Tuesday Bitcoin, the world’s largest cryptocurrency, was able to stage a comeback above $23,000 on Wednesday. Bitcoin has risen by over 38% this month, despite uncertainty in the crypto world and turmoil for some of the largest exchanges.

 Fueled by safe-haven demand, gold touched a weekly peak of $1,948 on Wednesday. Silver rose by 1.5% on the same day but would ultimately fail to retake the $24 mark with a closing price of $23.96.

 Gold consolidated on Thursday ending its six-session winning streak, after U.S. GDP data revealed that the economy grew at a 2.9% annual pace in the fourth quarter of 2022. This news, coupled with a dip in jobless claims led to momentum on Wall Street and a higher close for U.S. equities. The benchmark 10-year Treasury yield also rose, which contributed to headwinds for precious metals.

 Ultimately gold would fall by 0.9% on Thursday, while silver ended the day slightly higher at $24.05. This morning’s PCE inflation numbers were mostly in line with market expectations. The Personal Consumption Expenditures Price Index, or PCE, rose by 5% last month, compared to last year. PCE inflation and Core PCE inflation rose by 0.1% and 0.3% on a monthly basis.

 For some, today’s inflation data increased the odds of a smaller rate hike of 25 basis-points, as focus shifted to next week’s Fed policy meeting. While stocks were mixed following this morning’s inflation update, major indices are on track for weekly gains. Currently, the Nasdaq Composite leads in that category with what is currently a 3.9% weekly uptick, followed by the S&P 500, which is 2.5% higher on the week.

 Gold saw little change following the PCE news, and is currently hovering near $1,930. If maintained, this would be a very modest gain for the yellow metal, and its sixth straight weekly uptick. Silver fell following today’s news, and is currently 2.3% lower for the week at $23.48 an ounce.