Gold and Silver Rally Fades as Fed Rate-Cuts Rebound on CPI Inflation Data
Wednesday, 11/13/2024 14:57
GOLD and SILVER trimmed an overnight rally in London trade on Wednesday as betting rebounded that the Federal Reserve will cut Dollar interest rates yet again in December after new data showed US inflation staying lower than analysts feared ahead of Donald Trump retaking the White House.
The 'core' measure of Consumer Price Index inflation – excluding food and fuel – rose in October to 3.3% per year, the fastest since May but still only 0.1 percentage points above
this summer's 3-year low in core inflation.
Odds on the Fed cutting rates by another 0.25 points to 4.33% per year in December leapt on the data, rising from below 3-in-5 to stronger than 4-in-5 according to futures positioning tracked by derivatives exchange the
CME's FedWatch tool.
Gold spiked to $2615 per Troy ounce as the Dollar eased on the currency markets, trading $25 above Tuesday's 8-week low before easing back to $2604.
Silver meanwhile spiked through $31 per ounce, rallying 2.7% from yesterday's 5-week low before edging back to $30.75.
That still left gold priced in Dollars 6.7% beneath Halloween's pre-election record, with silver now 11.9% below mid-October's 12-year peak.
"The swift move lower in gold post-election ran counter to our strategists’ expectations," says a note from US financial services giant and London bullion market-maker J.P.Morgan.
"However, they think the sell-off is a stumble, not a sea change."
New York stock futures rose ahead of the opening, edging the S&P500 index back towards Monday's new record high above 6,000 points.
So-called cryptocurrency Bitcoin meantime rose towards $90,000 per unit, gaining almost 1/3rd since Trump's victory a week ago.
European bourses slipped in contrast, while the Euro price of gold held above €2460 per Troy ounce, down 4.5% from its end-October record.
Gold prices in UK Pound terms meantime rose above £2050, still £100 below Halloween's gold price record.
Industrially-useful platinum in contrast held near 2-month lows, trading at $944 per Troy ounce in US Dollars, while sister-metal palladium slipped to the very same price, hitting new 9-week lows.
Gold's $200 plunge since Trump won the White House last Wednesday morning was "driven by near-term position squaring in a well subscribed pre-election trade," says J.P.Morgan's note.
"[It isn't] a break in [JPM's] thesis that a Republican sweep of government will likely continue to fuel further upside for gold in 2025 as the debasement trade rumbles on."
Washington's 10-year borrowing costs fell further today from last week's 4-month highs, edging back to 4.37% per annum after the headline pace of US inflation accelerated only 0.2 points to 2.6% on today's new CPI data from the Bureau of Labor Statistics.
With the federal government's outstanding debt already topping 120% of the USA's world-leading annual economic output, current Vice President Kamala Harris's plans would have increased the national debt by $3.95 trillion over the next decade, said analysis by "nonpartisan, non-profit" think tank the Committee for a Responsible Federal Budget ahead of the November vote.
"President Trump's plan
would increase the debt by $7.75 trillion."
"Tax-related promises made by Trump point to additional risk to our deficit forecast in 2025 and 2026," said ratings agency Fitch following the Republican candidate's sweeping win last week.
Today data "confirms" that inflation is heading lower, said Minneapolis Fed President Neel Kashkari today following the BLS release.
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