Gold and Silver Rally After Worse-Than-Expected Inflation Report

 

Gold and Silver Rally After Worse-Than-Expected Inflation Data

(Bullion News Network) – Gold and silver prices are up big at midweek after a slow start Monday. The spot price of gold gained $20, crossing the $2,700/ozt line for the first time since December 11th of last year. Silver extended its recent rally, adding $0.82/ozt to its spot price and inching closer to the $31/ozt resistance. The price action was lopsided enough to drive down the gold-silver ratio, which lost 1.65 to settle at around 87.68:1 by the end of trading hours on Wednesday. The GSR peaked at a recent high near 90:1 on Monday but fell on both Tuesday and Wednesday. 

A worse-than-expected CPI reading drove today’s midweek retraction of gold and silver prices. The report, which is one of the Federal Reserve’s preferred inflation metrics, revealed that inflation sped up in December. The Consumer Price Index increased by .4%, which is the largest increase since February 2024. Wall Street gained in the wake of the data, with all three major markets logging their largest gains by percentage since President-elect Donald Trump’s unexpected victory in the 2024 election last November. 

Analysts say that the report’s “core” rating suggests a less pessimistic outlook for the economy. Contrary to forecaster expectations, the core numbers, which exclude food and energy costs, decreased its rate of increase from 3.3 to 3.2 for the first time in several months. The prognosis was not as good for the average consumer. Costs rose in December for several of the most important consumer expenditures, including grocery and gas prices. 

The new data reaffirms the Federal Reserve’s ongoing concern that inflation is stickier than it hoped. CME FedWatch’s implied probability of another FOMC rate cut at its January meeting rose slightly to 2.7%, although most experts believe the Fed will opt to keep rates unchanged at the first FOMC meeting of 2025. Although Fed rate cut speculation drove much of 2024’s precious metals run, both gold and silver tend to see increased consumer demand during periods of high inflation. Gold and silver prices gained on Wednesday as traders priced in another month of sticky consumer inflation. 

Next week should be a major test for both the economic outlook and the precious metals market. The initial jobless claims report will be published next Thursday, followed by January’s initial jobless claims report on Thursday. At the end of next week, a fresh consumer sentiment report should give markets more insight into the medium and long-term expectations of American consumers. Finally, the PMI will give the FOMC a key data point before it meets on January 29th. This full slate of economic reports should be crucial heading into what will likely be a tone-setting meeting of the Federal Reserve. 

Gold and silver gained today as markets reacted to another month of troubling inflation data. As American markets prepare for a new presidential administration set to inherit a number of domestic and international policy uncertainties, precious metal investors are closely monitoring both domestic economic data and the news.