Precious Metals Rally As Inflation Gauge Rises

November 15th, 2017 by

An increase in core inflation in the U.S. helped push the precious metals higher on Wednesday, much to the chagrin of the stock markets. Spot gold rallied 0.3% this morning, adding $4 per ounce to trade at $1,284/oz. However, the yellow metal was off its highs of $1,287.50/oz earlier in the session.

Silver prices initially jumped 0.8% to $17.14/oz before quickly erasing these gains to trade back at $17/oz. Although palladium slid 1% (-$10) to $971/oz, platinum was also slightly higher at $926/oz.

The markets were caught a bit off guard by two different economic data points reported by the U.S. government. Core inflation, as measured by the consumer price index (CPI), rose for the first time since January of this year. The Department of Labor reported that core inflation, which strips out volatile food and energy prices, advanced 0.2%. Overall, core CPI was up 1.8% year-on-year, indicating that broader measures of inflation may finally be working their way above the “healthy” 2% figure targeted by central banks.

In a separate report from the Department of Commerce, retail sales also rose 0.2% during October. This was a surprising result, as no increase over the previous month was anticipated. Of course, most analysts and investors expect a stronger performance in November and December as the spending spree of the winter holidays approaches.

Meanwhile, global stocks were deeply in the red this morning. Japan’s Nikkei lost more than 1.5% overnight while indices were down between 0.5% and 1% across Europe and Asia. Shares on Wall St followed suit, sending all three of the major U.S. indices tumbling by about 0.7%.

The U.S. dollar lost about 0.3% on the DXY index to a reading of 93.5. This helped the euro continue its positive momentum as the common currency traded well above $1.18. The yen also saw sharp gains, rallying to its strongest in nearly a month at ¥112.7 per dollar.

In international news, a military takeover in Zimbabwe to unseat longtime President Mugabe is roiling the region’s equity markets. Mugabe is 93 years old and is being confined to house arrest amid charges of rampant corruption among his administration’s ministers. The move sent Bitcoin prices skyrocketing in the country, which for all intents and purposes has no national currency.

Elsewhere around the globe, Venezuela has reportedly reached an agreement with one of its biggest creditors, Russia, to restructure its crippling debt burden. The Venezuelan government owes Russia more than $3 billion, but the plan will allow the repayment to be extended over several years. This relief should let the beleaguered South American country to focus on restructuring the payment of $60 billion in bonds that it owes to private creditors.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.