Gold Below $4,100, Silver -6%: Hot CPI Fuels Rate Fears
US inflation hits 3.7%: gold slips below $4,100 and silver drops over 6%. Why Fed rate-hike fears are back, plus momentum and key levels.
Key Takeaways
- Gold falls to $4,099 after the US inflation report, while silver plunges 6.2 percent.
- September inflation hits 3.7 percent, bringing an October Fed rate hike closer.
- Gold rebounds on Thursday, but Finanzmarktwelt considers the recovery temporary.
Wednesday evening belonged to precious metals in reverse. After the US consumer price data, gold lost 1.5 percent and slid to about $4,099 per ounce, according to Kitco, while silver dropped 6.2 percent to $55.41. The trigger was inflation running above expectations.
Silver in free fall, gold in retreat
The consumer price index for September rose 0.6 percent from the prior month and 3.7 percent from a year earlier. The consensus stood at 3.6 percent, and the August rate was 3.4 percent. Energy drove the surprise: gasoline jumped 9.1 percent. Core inflation, which excludes energy and food, remained comparatively tame at 0.3 percent month over month and 2.6 percent year over year.
For the central bank, the overall picture still matters. Kitco puts the probability of a Fed rate hike in October at just under 40 percent after the report, up from about 20 percent before the data. The 10-year Treasury yield approached 5.3 percent and hovered around 5.27 percent in the evening. For gold and silver, which pay no interest, that raises the opportunity cost of holding them.
Silver fell more than four times as much as gold. The smaller metal usually reacts disproportionately to rate and dollar moves because, as an industrial metal, it also depends on economic sentiment. Equities were weak in parallel: the S&P 500 lost 1.1 percent to 7,718.94 points, the Nasdaq Composite 1.9 percent. Brent held near $106 per barrel, adding to inflation pressure.
Thursday: yields turn, gold finds its footing
On Thursday the picture shifts, at least for gold. Markus Fugmann writes at Finanzmarktwelt that yields fell despite the prior day's higher inflation, which is why gold is rising. The backdrop is a sell-off in data-center stocks, at the center of which Fugmann sees doubts about AI valuations. In his view, the bond market spotted the risks earlier than equities. He expects, however, that gold's rise is only temporary.
Our momentum snapshot from Thursday morning shows gold at $4,178.50, more than $80 above Kitco's Wednesday-evening level. That is a recovery, but not yet a trend reversal.
What momentum says
Momentum signals a mixed picture: on the 1-hour chart gold is bullish, so the recovery is visible on the short timeframe. On the 4-hour, daily and weekly charts the state remains bearish. The higher-level trend therefore still points down, and Thursday's move remains a rebound within that frame for now.
Scenarios
If gold stays above support at $4,072.70 and $4,066.54, which Kitco names as the first levels, the recovery stays intact. Resistance at $4,114 and $4,134.62 already lies behind Thursday's price of $4,178.50.
If gold instead falls below the zone around $4,067, Thursday's recovery would be erased. If yields turn up again, as Fugmann considers possible, rate pressure returns.
For silver, Kitco sees support at $55.27 and resistance at $56.00 and $56.55. If silver breaks below $55.27, Wednesday's sell-off continues; above $56.55 it would at least be slowed.