Gold News

Gold Bullion Sinks to 6-Week Low as Firm US Inflation Sees Markets Adjust to 'Higher for Longer'

GOLD BULLION spiked, fell $20 per ounce, rallied $10 and then dropped to new 6-week lows Tuesday lunchtime in London as new US data said consumer-price inflation in the world's largest economy slowed again in January but held firmer than analysts had expected.
Ahead of the data, gold bullion priced in the Dollar had dropped back towards yesterday's 6-week trough of $1850 per ounce, before spiking to $1870 only to trade unchanged for the week so far at $1858 before falling to a new 1.5-month low beneath $1845.
With consensus forecasts predicting a drop in headline CPI inflation from 6.5% to 6.2% per year, the Bureau of Labor Statistics' first estimate of 6.4% showed the slowest increase in the US cost of living since October 2021.
Outside last summer's spike to 9.1% however, it would still mark a 4-decade high, sharply above the 21st Century's 2.5% average to date.
So-called 'core' inflation, excluding 'volatile' fuel and food prices, also slowed just one tick on the BLS's new data, dropping to 5.6% per year rather than the 5.5% forecast by most analysts ahead of today's data.
"The data doesn't really change the expectations of a 25-basis point hike at the next meeting," Reuters quotes a US portfolio manager today, but "I do expect a pause to be coming somewhat soon."
Betting on US interest rates, in contrast, has now flipped to seeing the Federal Reserve delaying any reversal of this year's increases until 2024 at the earliest, with the probability that the US central bank will end December at today's rate of 4.75% sinking from 4-in-5 this time last month to 1-in-3 a week ago and now barely 1-in-7 today according to derivatives exchange the CME.
Gold bullion priced in Dollars has gone from $1920 to $1875 and now down to $1852 over that time.
Chart of gold bullion priced in US Dollars. Source: BullionVault
"I expect that ongoing increases will be appropriate," said Fed governor Michelle Bowman to the American Bankers Association Community Banking Conference in Orlando, Florida last night, "and [interest rates] will need to remain there for some time to restore price stability."
Those comments echoed her colleague Christopher Waller saying Friday that "it might be a long fight [to defeat inflation], with interest rates higher for longer than some are currently expecting."
Major economy borrowing costs rose in the bond market, with 10-year US Treasury yields hitting New Year levels above 3.72% per year.
Rich-world stock markets meantime trimmed their earlier gains while the US Dollar slipped again on the FX market, edging 0.7% below Friday's 6-week high on its trade-weighted index.
Silver bullion meantime extended the drop in gold prices, falling to an 11-week low of $21.65 per ounce, down more than $3 from the 9-month high set less than a fortnight ago.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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