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Gold and silver lag despite the dollar’s broad weekly decline
Weaker Fed hike expectations and a risk-on stock rebound have outweighed the usual tailwind for precious metals this week.
A weaker US dollar typically supports gold and silver, but precious metals have not kept pace with the currency move, according to analysis by Action Forex. The article notes that EUR/USD has risen about 1.3% for the week so far while gold and silver gains have been comparatively muted.
Action Forex says the key difference is what is driving the dollar lower. This week’s dollar softness has been linked to fading expectations that the Federal Reserve will need to tighten again soon, rather than to recession fears, financial-crisis pressure, or falling real yields that would also boost safe-haven demand.
The analysis points to an interpretation of the latest FOMC meeting as more patient than urgent, despite three policymakers dissenting in favor of an immediate rate hike. It also cites weaker-than-expected second-quarter GDP and a cooling reading on core PCE inflation as reinforcing the shift in rate expectations.
At the same time, investors have rotated toward risk assets instead of defensive ones, Action Forex adds. After strong Microsoft earnings contributed to a more than 15% rally in the stock, the Nasdaq rose 2.78% and the Dow climbed 1.19% on Thursday, while Asia stocks also jumped, including a 17.91% surge in the KOSPI, leaving gold and silver without their usual catalyst.
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