On Tuesday, there was a significant increase in the value of precious metals such as gold. This was due to the release of the U.S. Consumer Price Index (CPI) for October, which indicated that inflation pressures were decreasing more than anticipated. As a result, there was speculation in the market that the Federal Reserve might not increase interest rates as aggressively as previously expected. The CPI remained the same as the previous month and only saw a slight annual increase of 3.2%, according to the Bureau of Labor Statistics.
The latest inflation data, which shows lower inflation, has caused the dollar to drop in value and Treasury yields to decrease. This has made it less probable for the Federal Reserve to raise interest rates in the near future. Consequently, the price of gold futures on the COMEX division increased by $16.30, closing at $1,966.50 per ounce. In New York, spot gold also rose by 1.1% to $1,967.54 per ounce, achieving the highest increase in a single day since October 27.
The positive outlook also affected base metals, as copper prices on the London Metal Exchange (LME) rose by 1.1% to $8,255 per metric ton. Normally, high interest rates decrease the demand for base metals in important industries like construction and manufacturing, and make them less appealing for investment purposes.
Traders who engage in swaps are currently factoring in the likelihood of two interest rate reductions by the Federal Reserve by July of next year. This represents a change from the initial expectation of only one rate cut prior to the release of the inflation report. Nevertheless, there is a lack of consensus among Wall Street banks regarding the pace at which policy easing will take place in 2024.
Comments made by various officials and analysts further impacted the market’s response. While speaking at a conference in Zurich, Federal Reserve Vice Chair Philip Jefferson stressed the importance of taking more decisive measures due to the uncertainty surrounding high inflation.
The wider influence of this was evident in the rise of stock markets, including prominent indexes like the Dow Jones, S&P 500 Index, and Nasdaq Composite Index, all finishing the day with gains. European markets also experienced a similar trend, boosted by the U.S. inflation data.
The announcement also provided reassurance prior to a scheduled meeting between US President Joe Biden and Chinese leader Xi Jinping, which is regarded as a favorable indication amid worldwide economic instability.
Moreover, there were also rises in the prices of valuable metals such as silver and platinum for delivery in December and January. This overall upward trend in the prices of precious metals corresponds to the slight decline in optimism among small businesses, as stated by the National Federation of Independent Business for the month of October. This decrease in optimism reflects the careful economic sentiment among small businesses due to worries about inflation.
Despite inflation rate decelerating, it still exceeds the Federal Reserve’s desired two percent target. In response, Fed Chairman Jerome Powell, along with other officials, have indicated a willingness to increase interest rates if deemed necessary. Additionally, these recent events have prompted conversations about the potential occurrence of an economic situation known as a “soft landing.”
Despite ongoing concerns about high British interest rates caused by wages rising faster than inflation, the prices of Brent North Sea crude and West Texas Intermediate remained stable in related commodities news. However, it is anticipated that there will be a significant decrease in British annual inflation.
According to certain Wall Street strategists, the decrease in inflationary pressures resulted in benefits for producers of raw materials and may signify the conclusion of the Federal Reserve’s cycle of raising interest rates.
In recent mining news, Teck Resources’ sale of its coal assets to Glencore is considered the largest mining deal of the year. This transaction brings to a close a long and closely monitored story that garnered attention from both investors and industry experts