Precious Metals Volatile On Geopolitics, Sticky Inflation Data

 

Metal Markets See Midweek Volatility On Geopolitics, PCE Report

(Bullion News Network) – Gold and silver prices began the day in the green but reversed course after October Personal Consumption Expenditures (PCE) data went live. The core PCE index rose by .3%, about in line with market expectations. The year-over-year index increased in October compared to September, suggesting that inflation remains sticky. Precious metal markets dropped following the data dump, with gold pulling back slightly from its early morning gains and silver losing nearly $.35 per troy ounce following a $.9 gain at market open. 

Traders are likely reacting to the core PCE index this morning, which increased on par with projections. Although inflation is still stickier and the core inflation rate is moving further away from the Fed’s longstanding target of 2 percent, the lukewarm core PCE data suggests that the Fed’s jumbo rate cut in September failed to trigger the significant uptick in inflation that some precious metal investors may have anticipated. 

The precious metals market is also grappling with a developing set of circumstances in the Middle East, a region whose geopolitical conflicts have helped push gold and silver to several highs throughout the year. This week, U.S. President Joe Biden announced that Israel and Lebanon had brokered a tentative ceasefire. The ceasefire officially went into effect this morning, allowing displaced Lebanese citizens to return to their homes. On the heels of this ceasefire, President Biden expressed his ongoing commitment to securing a similar peace agreement for the citizens of Gaza. 

In Europe, tensions continue to escalate between Russia, Ukraine, and NATO. Gold prices jumped last week as investors turned toward safe haven assets in response to Russia’s threat that Western meddling could turn the Ukraine war into a much larger international conflict. The escalation comes after the U.S. cleared Ukraine to use long-range American weapons to strike inside of Russia, a move which Putin says is a clear expansion of Western intervention in the isolated European conflict. 

This morning, Russian Deputy Foreign Minister Sergei Ryabkov warned American officials that U.S. involvement could contribute to a “spiral of escalation,” should the country continue to aid Ukraine in its defensive war against Russia. The statement follows a week of tense international dialogues after Russia fired intermediate-range ballistic missiles into Ukraine. Experts last week said that this may have been the first time the multi-warhead IRBMs, commonly associated with nuclear attacks, have been used in a non-testing environment. 

A combination of mixed signals created a volatile market for gold and silver heading into midweek before Thursday’s market closure on Thanksgiving. Both gold and silver opened the market in the green before dropping in price after the October PCE report came in nearly identical to expectations.