Precious Metals Climb Higher After Calm Inflation Report

 

Metals Climb Higher After Calm Inflation Report

(Bullion News Network) – Gold and silver will both end the day in the green, with gold gaining nearly $18 and silver prices jumping $0.35 since market open. This has been a volatile week for the gold-silver ratio, which peaked at just under 90:1 on Monday before collapsing midweek to today’s local low of 88.07:1. On a more macro level, price action across the gold and silver markets has been highly correlated this week, with both metals generally moving in the same direction each day. Today’s precious metals market closely mirrored Wall Street’s performance, which saw moderate gains on the heels of a softer-than-expected inflation report from the Bureau of Labor Statistics (BLS). 

The Consumer Price Index (CPI) for the month of February was released today and offered some much-needed relief to markets rocked by President Trump’s aggressive tariff threats. The figure dropped from .5% in January to just .2%, .1% lower than the median forecast of .3%. The year-over-year CPI also dipped below projections, clocking in .1% lower than the median forecast at 2.8%, which is down from 3% in January. The core CPI, arguably the Fed’s most reliable data point regarding inflation numbers, dropped from .4% to .2%, .1% lower than the median forecast of .3%. The data led to a midweek recovery for Wall Street, snapping a string of losses in the wake of growing recession, trade war, and inflation fears. 

Precious metal markets moved in the same direction, logging gains for both gold and silver after the better-than-expected inflation data. Gold hit a local low on Monday, dropping below $2,900 per troy ounce. Silver similarly floundered to open the week, falling to $32.11/ozt before recovering on Tuesday ahead of the inflation report. Gold followed the same trend, and both metals extended their spot price gains on Wednesday once news of the February CPI data became public. 

The longer-term outlook for safe haven assets may be strong. CNN’s Fear and Greed Index finds that markets are currently motivated by extreme fear, with Monday bringing markets its most ‘fearful’ motivation in over one year. Market volatility remains far above the baseline, according to the report, and safe haven demand is hovering close to a one-year high. Analysts typically associate an ‘extreme fear’ market with a resurgence in demand for safe haven assets, but precious metals like gold and silver are also highly motivated by both the inflation rate and the federal interest rate set by the Federal Open Market Committee (FOMC). 

Today’s good news on inflation is a good sign for traders hoping for a rate cut at the Fed’s March meeting, which will happen next Wednesday. CME FedWatch now finds an implies probability of 3% that the Fed will opt for a 25 basis point rate cut at that meeting, down from a projection of 4% yesterday and 6% last week. Still, the cooler inflation report may help justify an earlier-than-expected rate cut, especially given Fed Chair Jerome Powell’s insistence that the FOMC wants to see more progress toward the Committee’s longstanding 2% core inflation target before it feels confident enough to resume cutting rates. 

An unexpected economic downturn could also motivate the Fed to resume its rate cuts, analysts say. Concerns about a potential recession have taken center stage to start 2025, so much so that President Trump recently weighed in on the fears, saying that he does not see a recession in the USA’s near future. Still, today’s optimistic inflation data paired with growing uncertainty on Wall Street gives rate cut bulls several paths to see the FOMC take action.