Gold Price Spikes as US Inflation Data Ease 'Fed Rate Hike' Fears
Wednesday, 1/15/2025 15:16
The GOLD PRICE spiked against a falling US Dollar on Wednesday, coming within $100 of Halloween's all-time high for the 2nd time in a week as equities rose with bond prices – driving down borrowing costs – after new data said underlying inflation slowed a little last month in the world's largest economy, easing fears that the Fed's next move would be to raise interest rates.
Headline inflation hit 2.9% per year in December, the Bureau of Labor Statistics said, the fastest pace since July.
But so-called 'core' inflation excluding food and fuel slipped 0.1 percentage points to 3.2%, just below analysts' consensus forecasts.
Unmoved by yesterday's Producer Price inflation as well as by
the 'panic' in EFP contracts for turning US gold futures into physical bullion ahead of Trump 2.0's universal import tariffs, gold priced in the Dollar hit $2695 before pulling back $10 per Troy ounce.
Ten-year US Treasury yields meanwhile fell 14 basis points, the sharpest drop since August, as bond prices jumped from the lowest in 14 months.
With the Dollar falling again from Monday's 27-month high on its trade-weighted DXY index, that left gold in other currencies little moved, with the Euro price beneath €2595 and the UK Pound price at £2181, also a new all-time high earlier this New Year.
Betting on this month's Federal Reserve meeting, as tracked by derivatives exchange the
CME's FedWatch tool, continued to put near-100% odds on the US central bank making no change to overnight interest rates in January.
But while the position of most interest-rate futures traders still sees no change before June, the odds of a cut coming in May rose to 47%, up 10 percentage points from yesterday.
"The market will be encouraged by the decrease in core inflation," Bloomberg quotes one asset manager. "It should alleviate concerns the Fed would not only stop cutting interest rates, but could even reverse course and begin raising them."
"It certainly does not make the Fed more likely to ease," agrees another fund manager quoted by Reuters, "but it will ease some of the fears that their next move, at least in the near term, may be a raise."
Global stock markets had already rallied from yesterday's 2-month low on the MSCI World Index, with European bourses rising 1.1% to a 1-week high as the New York Stock Exchange opened.
China's CSI300 index ended the day lower, however, erasing 1/4 of Monday's steep gains, which had been
led by domestic chip-makers soaring on the latest threat from Washington to restrict Chinese access to US technology.
"For far too long, we have relied on taxing our Great People using the Internal Revenue Service (IRS),"
tweeted US President-Elect Donald Trump on his own TruthSocial platform overnight.
Retaking the White House next Monday, "We will begin charging those that make money off of us," Trump promised, announcing that "January 20, 2025, will be the birth date of the External Revenue Service" but not explaining how foreign manufacturers will be forced to pay tariffs rather than the US firms who import those goods.
Silver prices also spiked on today's US inflation data, surging by 50 cents to peak at $30.40 per Troy ounce, briefly erasing the last of this week's previous 3.0% drop.
Government bond prices also rallied sharply across other Western markets, driving 10-year German Bund yields down 10 basis points and comparable UK Gilt rates 16bps lower as US Treasury yields fell.
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