Precious Metals Respond to Inflation Data

Overview of Market Movements

In the early trading hours of Tuesday in the United States, gold and silver experienced a downturn, reversing their overnight gains and approaching their lowest prices of the day.

This shift came in response to a U.S. inflation report that exceeded expectations, aligning with the views of monetary policy hawks who advocate for the Federal Reserve to delay any cuts to U.S. interest rates. Specifically, gold futures for April dropped by $4.50 to settle at $2,028.70, while silver for March decreased by $0.147, landing at $22.61.

Inflation Data Influences Markets

Tuesday’s focal economic update was the consumer price index (CPI) for January, which showed a 3.1% year-on-year increase, surpassing the anticipated 2.9% and slightly below December’s 3.4% rise. The core CPI, which excludes food and energy costs, reported a 3.9% year-on-year increase for January. Following this news, U.S. stock indexes experienced a sell-off, Treasury yields climbed, and the U.S. dollar index saw an upturn.

Additional Economic Indicators

The day also brought other economic indicators, including the weekly Johnson Redbook report on retail sales, the National Federation of Independent Business (NFIB) small business optimism index, and data on real earnings. These reports contribute to the broader understanding of the current economic landscape.

Global Market Reactions

Overnight trading in Asian and European markets presented a mixed to weaker performance.

China is in the midst of its Lunar New Year celebration, leading to a temporary closure of many markets throughout the week in observance of the holiday

Meanwhile, U.S. stock index futures indicated a lower opening, attributed to profit-taking following the record highs reached on Monday.

External Market Dynamics

Key external markets on Tuesday saw the U.S. dollar index gaining strength. Additionally, Nymex crude oil prices rose, trading near $77.75 per barrel. The yield on the 10-year U.S. Treasury note also saw a significant increase to 4.287%, a noticeable jump from its level prior to the CPI report’s release.