Gold and Silver Retreat as Iran Deadline Approaches

 

Gold Down, Silver Sideways as Iran Deadline Approaches

(Bullion News Network) – Gold and silver retreated during a relatively calm trading session on Monday. The spot price of gold retreated by less than $25 per troy ounce. Silver prices practically moved sideways, losing just $0.01/ozt. The price-action favored silver, driving the gold-silver ratio lower. Platinum-group metals also pulled back on the day, with platinum losing fewer than $7 per troy ounce and palladium taking heavier losses at over $17.50/ozt. Two vital U.S. inflation readings are expected later this week and could have a major impact on American markets as the economic toll of the war in Iran becomes clearer.

Wall Street gained on Monday, with the S&P 500 logging its fourth consecutive winning day as traders hoped for a peace deal between the United States and Iran. Over the weekend, U.S. President Donald Trump reiterated his threat to begin bombing Iranian infrastructure if the country refuses to accept a deal to end the war. The opening of the Strait of Hormuz remains a key objective for the U.S. and its allies. An estimated 20% of the world’s annual oil supply flows through the vital chokepoint, which was closed by Iran in March after strikes by the United States and Israel. So far, Iranian and American leaders have sent conflicting signals about progress being made in peace talks. Last month, Iran rejected a proposal from the United States that would have given the U.S. partial control over the waterway. Trump has set a deadline for Tuesday at 8 PM ET for Tehran to approve a deal.

Two vital U.S. economic reports are due for release later this week. On Thursday, traders will be able to review the Personal Consumption Expenditures (PCE) index for the month of February. Forecasters project that the core PCE will remain unchanged at 0.4%, but the PCE index will climb by 0.1% from 0.3% to 0.4%. Friday will see the release of the Consumer Price Index (PCI) for the month of March. This report will include the earliest effects of the war in Iran and is expected to show a significant jump in consumer prices. The median forecast sees the CPI increasing by 0.6% from 0.3% to 0.9%. The core CPI is expected to increase by a smaller margin, with the median forecaster projecting a 0.1% increase from 0.2% to 0.3%. The core CPI report does not include ‘volatile’ prices, such as gas. The core CPI year-over-year is expected to increase by 0.2% from 2.5% to 2.7%.

The Federal Reserve does not seem poised to cut or raise interest rates at its April meeting. CME FedWatch projects the probability that the FOMC will raise rates at 1.6%, down from 2.1% one week ago. Last month, Federal Reserve Chair Jerome Powell told reporters that the central bank expects prices to increase as a result of the war but does not believe an emergency rate hike is necessary at this time. Instead, the FOMC seems prepared to take a “wait and see” approach ahead of its next meeting. A much stronger-than-expected U.S. employment report released last Friday may also help justify a no-change call at the upcoming meeting.

Precious metal prices moved very little to open the trading week, likely because traders are waiting to see how Trump’s Iran ultimatum plays out in the coming days. Inflation reports scheduled for Thursday and Friday will likely be the first real indicator of how the war in Iran is impacting consumer prices, so investors should expect heavy trading volume when those numbers go live.