Gold and Silver Dip Amid Profit-Taking Ahead of U.S. Inflation Report

 

Gold and Silver Dip On Strong USD, Profit-Taking Ahead of PCE Report

(Bullion News Network) – Gold and silver prices dipped this morning, with gold losing nearly $20 and silver dropping $.75 and plummeting below the $30/oz line. Both metals ended Tuesday in the green, and silver set a monthly high at $29.97 per ounce. Silver logged the heaviest losses today, dropping from that Tuesday high to a local low of $29.28. 

A sell-off triggered by stronger USD readings is likely behind the market dip. A .6% climb in the value of the dollar increased the relative cost of buying gold using other currencies. Traders are likely taking profits ahead of the upcoming Personal Consumption Expenditures (CPE) report, which is a key metric used to measure inflation. The CPE index, along with other key releases due at the end of August, will give traders more insight into what to expect at the Federal Reserve’s September meeting. 

At the annual Jackson Hole Economic Symposium, Federal Reserve Chair Jerome Powell hinted that the Federal Open Markets Committee is likely to confirm an interest rate cut at its September 17th meeting. “My confidence has grown,” Powell said, “that inflation is on a sustainable path back to 2 percent.” Until last month, the Fed maintained a hawkish monetary approach, noting in its July meeting that interest rate cuts will happen once inflation begins moving more sustainably toward the Federal Reserve’s longstanding 2% target. 

Powell had this to say last week about the timing and pace of rate cuts: 

The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.

Precious Metal Traders Pull Back Ahead of Key Inflation Report

The Personal Consumption Expenditures (PCE) price index for the month of July is slated for release on Friday and will play a major role in the direction that both gold and silver markets move heading into September. This report is the most significant measure of inflation used by the Federal Open Markets Committee, the substructure of the Federal Reserve responsible for finalizing the federal interest rate.

Federal Reserve officials consider the PCE to be the “most consistent [inflation metric] over the longer run.” Inflationary data plays a vital role in the monetary policy of the Fed, whose longstanding mandate is to minimize inflation and maximize American employment. As Powell reiterated in his Jackson Hole speech last week, the tone of inflation data reports will provide more insight into both the timing and the size of upcoming rate cuts. 

BREAKING: Jerome Powell says “the time has come” for the Fed to cut interest rates https://t.co/l0Gg1MnebR pic.twitter.com/suymguamNr

— Bloomberg (@business) August 23, 2024

Results from this Friday’s PCE index will give traders more insight into what to expect from the Federal Reserve’s next meeting. A 25 basis point rate cut is the most likely outcome, according to analysts, but a bolder rate cut is not entirely out of the question. Evidence that inflation is falling more quickly than anticipated would incentivize the Fed to act more aggressively with a 50 basis point reduction to the federal interest rate. 

Both gold and silver will end the day in the red as traders pull back and take profits ahead of a key inflation report slated for release on Friday, August 30th.