Gold And Silver Rally As Inflation Data Eases Rate Hike Concerns
EDITOR'S NOTE: Gold and silver prices soared to new heights on Thursday as the U.S. dollar faced a significant decline in the wake of June's inflation data release. With gold futures reaching their highest levels since mid-June and silver futures hitting a two-month peak, market sentiment shifted towards the belief that the Federal Reserve's interest rate hikes may soon come to a close. The easing of inflationary pressures, coupled with a weakening dollar, propelled the precious metals market to a bullish stance, enticing investors and signaling a potential shift in the monetary policy landscape.
Gold futures on Thursday traded at their highest levels since mid-June, while silver touched its highest prices in two months, as the U.S. dollar tumbled following the release of June inflation data.
The U.S. June readings for wholesale prices released Thursday and the consumer price index on Wednesday showed a slowdown in inflation, raising the prospect that the Federal Reserve’s interest-rate hikes may soon be nearing an end.
Price action
- Gold futures for August delivery GC00, -0.04% GCQ23, -0.04% gained $2.10, or 0.1%, to settle at $1,963.80 per ounce on Comex, with front-month prices finishing at their highest levels since June 16, according to FactSet data.
- Silver futures for September delivery SI00, 1.05% SIU23, 1.05% gained 64 cents, or 2.6%, to $24.95 per ounce, end at the highest since May.
- Palladium futures for September PAU23, -1.76% increased by $12, or 0.9%, to $1,291.80 per ounce, while platinum futures for October PLV23, 0.06% gained $26.80, or 2.8%, to $983.40 per ounce.
- Copper futures for September HGU23, -0.37% gained 9 cents, or 2.3%, to $3.94 per pound.
Market drivers
U.S. wholesale prices rose by 0.1% in June, the government reported Thursday. That’s less than the 0.2% increase forecast by economists polled by The Wall Street Journal.
The data followed a modest 0.2% rise in June for the U.S. consumer price index, with the yearly rate of inflation slowing to 3% from 4%, on Wednesday.
U.S. consumer price inflation fell to its lowest level since 2021, allowing Treasury yields to fall sharply. Investors immediately heralded the report as a game changer that bolstered expectations that the Fed might only deliver one more interest-rate hike in July before leaving rates on hold until some time next year.
“A tame U.S. inflation report has the marketplace thinking the Federal Reserve may be about done raising interest rates. That’s bullish for commodity markets, including the metals,” said Jim Wyckoff, senior analyst at Kitco.
Dollar-denominated metals prices received another boost from a sharply weaker U.S. dollar, which has fallen to its lowest level against its main rivals in more than a year, according to the ICE U.S. Dollar Index DXY, 0.16%, a closely watched gauge of the greenback’s value. The index was off by nearly 0.7% at 99.866 in Thursday dealings.
Traders are expecting an end to interest-rate hikes, and the U.S. dollar index has “crashed,” said Chintan Karnani, an independent consultant who’s tracked the gold market for the last 20 years. Asian currencies have gained over the last two days versus the dollar all on the “expectations that the U.S. dollar is on the verge of forming a long-term top,” as future interest-rate hike expectations have declined considerably.
Originally published by: Myra P. Saefong and Joseph Adinolfi on Market Watch
