The latest batch of US inflation figures resulted in gold and silver falling yesterday as markets continue to readjust rate cut expectations from the Fed.
The report showed that the annual headline inflation came in at 3.1% for January. Although this was a reduction on December’s 3.4%, analysts had forecast a figure of 2.9%, and the hotter-than-expected number caught markets by surprise. Despite multiple statements from Fed members pushing back against rate cuts, markets have continued to hope for an early cut in March. This latest release however has pushed any prospects of cuts to May at least.
As a result, the US dollar index (a measure of the dollar’s relative strength against other currencies) climbed over 1%, pushing gold and silver lower.
Gold fell sharply yesterday following the latest US inflation figures.
Gold quickly sank from $2,030 to stabilise at around $1,990 per ounce, a fall of over 1.8%. Crucially for gold, this means it has fallen below the key psychological level of $2,000 for the first time in two months. The latest spree above $2,000 was a record for gold, the longest period in which it had held above $2,000, and breaching this level could see gold slip further.
Silver dropped from $23.07 to currently trade around the $22 mark, falling more than 3%. Silver has been quite erratic of late, and this level was seen in late-January. If it falls below $22 with any momentum however, then silver could test October’s lows of $20.73.
In the UK today the opposite has been seen. Inflation figures came in slightly lower than expected, causing the pound to slip further, and gold and silver prices to recover (very slightly) following yesterday’s fall. This leaves gold at £1,585 from a low of £1,579, and silver at £17.56 after hitting £17.44 per ounce.
Markets have now largely moved away from any price movements based on the ongoing conflict in the Middle East, or Ukraine, and instead have focused solely on the rate and pace of US interest rates. These geopolitical events can’t be discounted of course and could still provide further safe haven demand for gold and silver. If not however, and the dollar does remain the key driver for precious metals, then look for further price drops on any stronger-than-expected economic or inflation figures. Or, as seen in the UK today, some recovery should inflation trend downwards.
