Gold and Silver Trends After US CPI Data Signal an Important Message

Gold and Silver Set to Resume Upward Trend This Week
Published on: Apr 10, 2024

The latest release of the Consumer Price Index (CPI) in the United States has exceeded expectations, but precious metal traders don’t seem overly concerned. While the price of gold experienced a slight intraday decline, it rebounded from the day’s low point, and the price of silver increased to nearly a 3-year high. Although the single-day trends of gold and silver prices may not be significant, the signals they are sending hold great importance for investors in their future operations.

First, let’s examine the data. The US Bureau of Labor Statistics reported on Wednesday that the CPI increased by 0.4% month-on-month in March, the same as the February increase, and rose by 3.5% year-on-year, marking the largest increase since September. Economists had previously anticipated a 0.3% month-on-month increase and a 3.4% year-on-year increase in the CPI. Additionally, the core CPI, which excludes food and energy, rose by 3.7% year-on-year.

Today’s CPI data in the United States supports a hawkish monetary policy, casting doubt on whether the Federal Reserve will actually cut interest rates in June. However, US President Biden stated after the release of the CPI data that he still expects the Federal Reserve to cut interest rates before the end of the year, suggesting that Wednesday’s report may delay the start of the interest rate cut by at least a month.

From a technical analysis perspective, the June gold futures price reached a record high on Tuesday. Bulls have the strong near-term technical advantage, with a 7-week-old uptrend established on the daily chart. Bulls’ next price target for is to break the important resistance level at a closing price of $2400.

The May silver futures price moved beyond the daily range and reached almost a 3-year high. Similarly, silver bulls have a technical advantage, with a 7-week accelerated uptrend established on the daily chart. The next bullish target is to break the important technical resistance level at a closing price of $30, while the next bearish target is to break the support level at $26.40. The first resistance level is today’s high of $28.655, followed by $29.00, while the next support level is $28.00, followed by today’s low of $27.64.

Heraeus’ precious metals analysts recently pointed out that gold seems to be overbought, due for an imminent correction, but silver will gain support from both the investment sector and industrial demand. Investment and industrial sectors each account for approximately 50% of total silver demand.

Over the past two months, the trend of silver prices has been notably weaker than that of gold, but it successfully broke through $27 last week.

In comparison to gold, silver has a higher beta, so if retail investors’ interest increases and drives growth in silver ETF holdings, there is a good chance that silver will outperform gold in the future. Unlike the gold market, silver investors have once again entered the ETF market, with silver ETF inflows of 10.7 million ounces over the past two weeks, resulting in a 3% year-on-year increase in total holdings to 724 million ounces. Additionally, it is worth mentioning that the price trends of silver and copper are converging, with copper being the recent strong performer.

On the industrial demand side, analysts believe that silver demand will also increase this year, based on recent strong manufacturing data from the United States and China, and the continued growth of China’s photovoltaic installation volume.

Copper Gold Precious Metals Silver