Gold and silver prices moved lower on Thursday as Treasury yields and the dollar climbed in the wake of stronger than expected U.S. September consumer price inflation data that supported further aggressive interest-rate hikes by the Federal Reserve.
Price action
- Gold futures for December delivery GCZ22, -1.21% fell $28.50, or 1.7%, to $1,649 per ounce on Comex.
- December silver futures SIZ22, -1.52% declined by 44.3 cents, or 2.3%, to $18.495 per ounce.
- December palladium PAZ22, -2.01% lost $83.40, or 3.9%, to $2,053 per ounce, while platinum futures for January delivery PLF23, -0.35% fell $16.50, or 1.9%, to $864.50 per ounce.
- Copper futures expiring in December HGZ22, -0.82% shed 3.6 cents, or 1.1%, to $3.389 per pound.
What’s happening
The gold price declined after “hot consumer inflation data, which now puts some odds of the [Federal Open Market Committee] raising rates by a full point at their next meeting” in November, Peter Spina, president of GoldSeek.com, told MarketWatch. Hot inflation data “continues to hurt gold as yields rise.”
The U.S. cost of living rose 0.4% in September and pointed to high inflation persisting through the end of the year. Economists polled by The Wall Street Journal had forecast a 0.3% increase.
Against that backdrop, the yield on the 10-year Treasury note TMUBMUSD10Y, 3.995% was up 13 points at $4.035% in Thursday dealings.
“Gold remains well supported on pullbacks and despite the 10-year yields now over 4%, gold remains above its prior lows near $1,600,” said Spina.
Interest rates can continue to surge higher, but “we all know the Fed cannot afford to aggressively raise rates for too long without creating a dangerous problem among the piles and piles of debt,” he said. “The system cannot sustain significantly higher rates without triggering a deflationary situation.”
“” The system cannot sustain significantly higher rates without triggering a deflationary situation.” ”
“This is a difficult situation for the Fed and central banks. They will be forced to pivot, but the question is when,” Spina said. It is “not imminent,” and “I expect another two to three meetings maximum before we reach this point, at which gold will begin to soar.”
For now, traders will be watching to see how gold reacts in the coming days, he said. “I believe buyers will step in as seller exhaustion continues and speculators trying to short will be unable to break the price to new lows.”
Silver, meanwhile, is “even more exciting as the price falls below many miners’ production costs” near $18 an ounce, Spina said.