The price of gold futures rose 0.8 percent to $4,478 an ounce, continuing its rally in a fourth session. Traders reacted to the report with silver falling close to $64.769, off about 0.5%.
Each of the moves represented a type of market structure for each metal. Lower expectations for rates, a weaker dollar, and renewed demand for investments bolstered gold. Silver kept those monetary connections, but the profit motive and industrialization of the market muted the initial CPI reaction.
CPI Data Eases The Need for Another Fed Rate Hike
Consumer prices in the U.S. rose 0.1% in July, in line with economists’ estimate, Reuters reported on Wednesday. The annual inflation rate fell to 3.4% from 3.5% in June. The core rate increased 0.2% month-on-month but fell 0.1% year-on-year to 2.5%.
Those rates lowered market expectations of a September rate hike. Following the release, the dollar index dropped 0.12% to 99.69. A lower dollar reduces the foreign-currency demand for dollar-priced metals.
Treasury yields were mixed. The two-year yield fell just shy of 4.178%, a sign of a cooler near-term rate outlook. The ten-year yield moved a tick higher to around 4.655%, though, as investors considered inflation threats outside the window of the next Fed meeting.
Gold Price Surges as Dollar Declines Following CPI Release
Gold was a more direct beneficiary of the slide in near-term rate expectations. Since gold doesn’t pay interest, lower future rates make it less costly by opportunity. Gold futures moved up towards $4,478, getting close to the psychological $4,500 level.
One chart, shared by Mr. Uppy, put gold right around $4,500 following the CPI report and indicated increased ETF inflows across the board on a weekly basis. Separately, data showed a fifth day in a row of inflows, adding demand beyond the inflation trade.
Overall, gold futures have added 4.2% in four days and 8.1% for the month, positioning it near its highest close since June 4. Still, yesterday’s CPI data met expectations rather than providing a significant downward surprise.
Silver Price Holds Its Gains Despite a Milder Daily Move
Meanwhile, silver prices dipped a bit even while gold prices climbed. Prices hovered around $64.769 per ounce after recovering some early losses. Similar to gold, silver is influenced by changes in rates and the dollar, but its industrial demand adds another layer of short-term volatility.
Andrei Sobolev’s one-hour chart showed a prolonged fifth wave within a diagonal structure, his accompanying note saying the pattern captured about 15% of silver’s net spot movement. The chart showed prices holding steady near recent highs after completing an upward impulse.
The path shown allows for an initial dip before another surge; this projection is based on technical analysis and isn’t a guarantee of future price movements. Current action has buyers defending most of the recent rally, even if silver didn’t match gold’s post-CPI gains.
Rate Expectations Keep Both Metals On the Fed’s Radar
Another chart by Miad compared gold to federal funds futures, showing how anticipated interest rates could move lower toward 3.75% as the price of gold rises. This correlation reflects gold’s typical sensitivity to real yields and future monetary policy.
Add investment demand and a strong performance from central banks to the mix, and gold is gaining further support. The ETF chart from Mr. Uppy detailed the biggest weekly inflows since April and noted increased Chinese purchases and potential purchases from South Korea, broadening the focus beyond U.S. inflation.
Silver traders also contend with the same dollar and yield trends, though industrial expectations can swing its price on any given day. Next, we’ll be watching producer prices, upcoming labor reports, and Fed statements to see what the next moves for rates and precious metals might be. Gold has its eyes set on $4,500, while silver is holding around $65 following its recent run.
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