By Gold and silver prices surged on Thursday after a mixed US inflation report paved the way for a volatile session for the precious metals.
Although the US inflation data was hotter than expected, the labor market report was weaker than anticipated.
“Given the Federal Reserve’s avowed prioritization of employment security over fighting inflation – suggests a greater chance the bank will maintain a pro-easing stance,” Joaquin Monfort, editor at Fxstreet, said in a report.
Lower interest rates bode well for both gold and silver as these are non-yielding assets, unlike bonds.
Gold edges higher after US CPI data
Gold prices were trading 0.5% higher on COMEX after the release of the US consumer price index data.
The US CPI index showed a rise of 2.4% annually in September compared with 2.5% in August. However, the reading was higher than 2.3% expected by economists.
The CPI index, excluding food and energy, rose 3.3% annually last month, compared with 3.2% in August, and also beat forecasts of 3.2% by economists.
Meanwhile, the jobs data showed that people filing for unemployment claims for the first time in the US rose to 258,000 in the week ending Tuesday from 225,000 in the previous week.
The unemployment claims data also beat analysts’ expectations of 230,000.
Federal Reserve Bank of San Francisco President Mary Daly said on Wednesday that she expects one or two more interest rate cuts by the Fed before the end of the year.
She further said that the labor market was more concerning than accelerating inflation in the US.
The Fed minutes released last night played a role in this change as it was revealed that quite a few policymakers were skeptical about a 50 bps cut in September.
Zain Vawda, market analyst at OANDA, said in a note:
The fact that some policymakers were concerned in September, the recent jobs report is only going to further strengthen their resolve at the November meeting.
At the time of writing, the price of gold on COMEX was at $2,641.70 per ounce, up 0.6%. Analysts said the $2,600 per ounce level remains a psychological barrier for gold prices.
If prices break below the $2,600 level, then it could lead to a significant buying opportunity for investors, said Vawda.
Safe-haven demand supports bullion
Even as the inflation rate in the US continues to be sticky, and there are uncertainties about the quantum of rate cuts by the Fed, safe-haven demand has kept bullion prices higher.
Ongoing tensions in the Middle East have boosted sentiments among investors for safe-haven assets such as precious metals.
Israel continued its attack on Lebanon, while the market awaits the former’s retaliation against Iran.
Tehran fired over 100 missiles toward Israel’s Tel Aviv last week in an escalation of the ongoing conflict.
Additionally, reports said that US President Joe Biden has urged Israel to limit its retaliation against Iran to military targets and not cripple oil supply from Tehran.
Silver gains after US CPI data
Silver prices rose more than 1% on Thursday, following hotter-than-expected US CPI data.
“The white metal struggles for direction as market participants are taking time to digest inflationary figures and adjust expectations for the Federal Reserve (Fed) interest rate outlook for the remaining year,” according to a Fxstreet report.
Silver prices have risen nearly 8% during the September quarter, and were more than 30% higher from the end of 2023.
According to Barchart.com, silver’s 1980 all-time high at over $50 remains the ultimate upside technical target.
At the time of writing, the most active silver contract on COMEX was at $31.062 per ounce, up 1.3% from the previous close.
Palladium prices surge 2%
Futures contracts of palladium on the New York Mercantile Exchange rose more than 2% on Thursday to $1,066.53.
According to Barchart, palladium prices have been moving in a sideways direction since August.
“The sideways trading pattern could be a sign that palladium prices are bottoming after the plunge from the March 2022 record peak.”
Palladium futures on NYMEX fell a whopping 76.2% from $3,425 in March 2022 to just $813.50 in August this year.
Prices have somewhat risen 2.3% during the September quarter but were still nearly 10% lower over January-June.
The price decline was due to the growing penetration of battery electric vehicles and a lackluster automobile industry. Palladium is used in catalytic converters in petrol and diesel engines to reduce carbon emissions.
The World Platinum Investment Council said:
Despite 2024 representing a third consecutive deficit (and the third largest in the previous 10-years), an extreme level of net short positions in the futures markets suggest the market believes above ground stocks are sufficient to fill the supply/demand balances at current prices.
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