Market Update March 12 – Gold Rally Pauses on Inflation Data

The US Labor Department released the latest inflation numbers this morning, and the markets have reacted. The Consumer Price Index (CPI) rose 0.4% in February, in line with estimates, with a higher-than-expected annual increase of 3.2%. It was expected to rise by 3.1% year over year. 

Core CPI, which excludes food and energy, also climbed 0.4%, surpassing the 0.3% estimate, with a year-over-year rise of 3.8%. Analysts had anticipated a 3.7% annual increase. As a result, the Dow Jones, the S&P 500 and the Nasdaq have all seen gains this morning, as have 10-year Treasury notes. The US Dollar Index (DXY) is back up over 103, following a recent dip. 

Unfortunately, gold and silver are losers on the latest data. Gold witnessed a significant decline for the first time in nine trading sessions on the news and is currently trading around USD $2155/oz. Higher than expected inflation suggests that the Fed may hold off on cutting interest rates, which is negative for gold sentiment. Silver also reacted, down nearly 2% from its recent highs.

The recent gold rally caught Wall Street off guard. Referred to as the ‘quiet’ and ‘stealth’ rally, the primary driver has been demand from Central Banks and the futures market. Gold-backed ETFs have not yet joined the party, and their participation will be required if/when we are going to see another major leg up. The recent demand for Bitcoin ETFs is likely serving as competition; however, fundamentals for gold’s positioning as a geo-political/macro-economic/inflation hedge remain strong and can not be ignored.

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Mark Yaxley, CEO of Strategic Wealth Preservation (SWP), began his journey in precious metals with Kitco Metals in 2006. Co-founding SWP in 2014, he now guides individual and commercial clients towards their investment goals. Renowned for his 'Inside the Vault' YouTube series, Mark has helped millions gain insights into gold and silver bullion ownership.