Gold Down, Silver Up After Hot March Inflation Report

 

Gold Up, Silver Down After Hot March Inflation Report

(Bullion News Network) – Gold and silver moved in opposite directions on Friday as American traders digested March’s inflation figures. The spot price of gold retreated by approximately $13.29 per troy ounce, snapping a three-day winning streak with a relatively minimal loss. Silver prices increased, with the precious metal adding around $0.75/ozt to cross $76 per troy ounce.

The price action favored silver, driving the gold-silver ratio marginally higher. Platinum-group metals once again saw more volatility than gold or silver, with platinum and palladium both retreating to close the trading week. Palladium outpaced platinum, with the former losing approximately $21/ozt compared to the nearly $50/ozt shed by the latter.

Today’s performance comes on the heels of the March Consumer Price Index (CPI), which was the first monthly U.S. inflation report to reflect price shifts resulting from the war in Iran.

The March Consumer Price Index, one of the Federal Reserve’s preferred measures of inflation, saw consumer prices increase substantially throughout March. The CPI jumped 3.3% last month, largely due to the March war between the United States and Iran.

It is worth noting that the impact of the war on consumer prices was less pronounced than expected, although rising inflation numbers could still spell trouble for the U.S. economy as ships begin to pass through the Strait of Hormuz for the first time in weeks. Future inflation reports could provide more insight into whether the war’s inflationary impact will be a one-time bump or a longer-term influence on consumer prices.

Last month, Federal Reserve Chair Jerome Powell made this argument as he spoke to reporters in a press conference following the March FOMC interest rate decision.

Near-term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by supply disruptions in the Middle East […] But the implications of events in the Middle East for the U.S. economy are uncertain. In the near term, higher energy prices will push up overall inflation, but it is too soon to know the scope and duration of the potential effects on the economy.

In summary, traders should anticipate that interest rate change expectations will fluctuate as new U.S. inflation and employment data become available. This should be especially true for reports that reflect the beginning and, moving forward, longer-term impacts of the war in Iran on both consumer prices and the job market.

Currently, forecasters expect the FOMC to leave rates unchanged at its April 29th meeting. CME FedWatch currently projects the probability of a no-change rate cut decision at 98.4%. The forecaster projects a probability of a rate hike at 1.6%, up from 1.0% one week ago. In other words, the Fed seems poised to keep rates unchanged heading into May.

The status of the war in Iran remained a major uncertainty for American markets on Friday. Earlier this week, the U.S. and Iran secured a shaky ceasefire after Iran agreed to a last-minute two-week peace deal brokered by Pakistan. After U.S. President Donald Trump threatened to strike key energy plants and other pieces of civilian infrastructure, Iranian officials agreed to reopen the Strait of Hormuz during the two-week ceasefire. Israel also approved the ceasefire deal.

The next day, however, Iran claimed that Israel had violated the terms of the agreement by continuing its assault on Lebanon, leaving the exact status of the Strait of Hormuz uncertain heading into peace talks, which will take place this weekend.

American markets closed higher on Friday, but the precious metals market saw little change from Thursday’s closing numbers. Gold logged a loss of approximately $13.29 per troy ounce, while silver gained just under $0.75/ozt.

Next week, speeches from several Federal Reserve officials should give traders a bit more information about how the central bank feels about American economic prospects following the ceasefire in the Middle East. The Federal Reserve will also release its “Beige Book” on Wednesday. The document will cover qualitative economic intelligence from each of the Federal Reserve’s districts, which could potentially reveal angles to the U.S. economic system not represented in existing “hard” data.