Gold Slows, Silver Jumps On Fresh Inflation Data

 

Gold Calms, Silver Jumps After Rocky CPI Inflation Report

(Bullion News Network) – After Monday’s strong start, the gold price run slowed on Tuesday and Wednesday. The yellowish precious metal lost just over $10 Tuesday before recovering those losses today on Wednesday. Gold moved minimally today but will close about $9 higher than Tuesday’s spot price, thanks in no small part to mixed signals from the Bureau of Labor Statistics. The Bureau’s Consumer Price Index (CPI), one of the Federal Reserve’s core inflation metrics, showed that inflation climbed to 3% for the month of January, increasing by .5% in what experts say is the largest monthly increase in over five months. The core CPI also came in higher than economic projections, a data point that will very likely factor into the FOMC’s rate adjustment reasoning when the Fed meets in Mid March. 

Silver fared better than gold in the troubling inflation report’s wake. The spot price of silver jumped nearly $0.30 per troy ounce early Wednesday morning, peaking at $32.36/ozt at midday before stabilizing a couple cents lower at $32.34. This momentum comes on the heels of a volatile couple of days for silver, which climbed from $31.82/ozt on Friday to $32.05/ozt Monday before dropping back down to $31.83/ozt Tuesday evening. Silver prices are now at a seven-day peak and are sharply up from Monday. The gold-silver ratio is slightly elevated at 89.79:1 but remains down from yesterday’s high, which was the highest gold-silver ratio in over a year (91.05:1). 

Although gold typically responds positively to higher inflation rates, analysts note that today’s CPI data is a mixed bag for gold bulls. The inflation data suggests that the Federal Reserve will most likely keep the federal interest rate unchanged when it meets on March 19th, which is a poor signal for gold, a metal that correlated negatively with interest rates for most of 2024. CME FedWatch tracks the implied probability of federal interest rate reductions and now projects only a 2.5% probability that the FOMC will move to reduce rates at its next meeting. This is down from 5% yesterday, 17% one week ago, and 23.8% in January. While higher inflation rates may motivate more safe haven demand for inflation hedges like gold, gold bulls are anchored by the core implication of today’s report – that rates will likely remain unchanged in March. 

Despite a bearish case for gold forming around rate cut probabilities, safe haven demand backed by geopolitical uncertainty continues to be a buoy for precious metal prices. Fears concerning the possibility of trade and tariff wars, a renewed offensive in Gaza, and talks of land cession from Ukraine to Russia remain powerful motivators for investors to hedge against uncertainty using precious metals. 

Gold is up 10.73 on the year and nearly even on the week. Silver prices are up 12.31% since January 1st and 1.06% on the week.