The Impact of Recent USA Inflation Data on Gold Prices

Author: Connor Campbell - Bullion & Economics Editor

Published: 15 Feb 2023

Last Updated: 15 Feb 2023


Recent US inflation data has caused a fall in the price of gold, following a trend of disinflation. The inflation figures show a slight slowdown, but are still above the Federal Reserve's target. The slowdown has led to a fall in precious metal prices, especially gold and silver, and is likely to affect the Federal Reserve's interest rate policy.

Gold Price Movements in Response to US Inflation Data

Recent market movements have seen a slight drop in the price of gold by $20 per ounce, followed by a further drop to a new 6-week low, caused by the release of US inflation data. While the figures were lower than anticipated, the news still caused a stir in the market, particularly among gold investors. Despite the recent trend of disinflation, the inflation data shows that inflation may have slowed down slightly, but it is still above the Federal Reserve's target of 2%.

Prior to the data release, the gold price in the US Dollar had already dropped to a 6-week trough of $1850 per ounce. The gold price later spiked to $1870 but soon traded unchanged for the week so far at $1858 before falling to a new 1.5-month low beneath $1845. A 0.1% reduction is far from the kind of fall markets and consumers had hoped to see.

What Are Usa’s Inflation Figures

The recently released US inflation figures for January indicate that inflation has slowed down slightly. According to recent data, the US annual inflation rate decreased marginally from 6.5% in the previous month to 6.4%. The core inflation figures, which exclude volatile fuel and food prices, also slowed down to 5.6% per year, just one tick below most analysts' forecast of 5.5% ahead of today's data. Though there is some concern about the slow-down of inflation, it is important to note that the US is still experiencing a 4-decade high, which is sharply above the 21st Century's 2.5% average to date.

How a Decreased Inflated Dollar Impacts Metal Prices

The release of inflation data has led to instant currency fluctuations for the dollar as markets weigh up what it might mean for the Federal Reserve's next policy committee meeting. Volatility remains high, however, given that inflation failed to deviate higher or lower, providing ammo to both camps arguing over the direction rates should take. The recent slowdown in inflation has led to a fall in the price of precious metals, particularly gold and silver. Gold is down more than 3% in the past month after almost reaching $2,000 per ounce, and silver has also seen a substantial pullback, down nearly 10% in the US.

Could the Federal Rerserve Increase Interest Rates?

Looking ahead the US inflation data is likely to have a significant impact on the Federal Reserve's interest rate policy. If the US economy continues to look resilient while inflation fails to come down quickly enough, the Federal Reserve may have little choice but to hike interest rates by another 50 basis points, which would trigger further strength for the dollar and push precious metals down further. It's worth noting that the outlook for the global economy is still uncertain, and there are several factors that could impact the performance of precious metals. For example, there are concerns over rising interest rates in China, which could lead to a slowdown in the country's economy. This could have a knock-on effect on the global economy and the demand for precious metals.

United States Inflation and Its Effect on Precious Metals

In conclusion, the recent US inflation data has had a significant impact on the global economy and the performance of precious metals. While precious metals have traditionally been seen as a safe haven, the recent fall in gold and silver prices shows that they are not immune to economic uncertainty. We encourage investors to keep a close eye on economic indicators and be prepared to adjust their investment strategies accordingly. Diversification of portfolios and considering alternative investment options that may be less sensitive to economic volatility is essential in such uncertain times.

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