Gold prices held steady on Wednesday, but silver saw significant gains, pushing the Gold/Silver Ratio lower as weaker-than-expected US inflation data spurred a rally in Western stock markets.
US Inflation Data Spurs Market Reaction
The rally in equities came alongside growing consensus that the new US administration would not offer a “Trump put” to alleviate the downturn in New York’s stock market. This shift coincided with a notable reversal in White House trade tariffs and foreign policy.
S&P 500 futures surged 1.0%, recovering from Tuesday’s six-month low, while gold prices fluctuated within an $8 range around $2914 per Troy ounce. This movement followed new data revealing that US inflation had slowed more than analysts anticipated in February, dropping to 2.8% year-over-year and 3.1% on the “core” measure, which excludes food and fuel.
Silver Outperforms Gold
In contrast to gold’s steadiness, silver rose sharply, nearing a six-month high of $33.18 per Troy ounce. The industrially significant precious metal had earlier fixed above $33 in London’s midday benchmarking auction, marking the first time in nearly a month that silver reached this level. Silver had previously exceeded the $33 mark 11 times between October and February, with the highest price since 2011 seen last fall.
As a result, the price of gold relative to silver edged down toward 88, the lowest since the beginning of the year. The Gold/Silver Ratio had reached a 2.5-year high near 92 in February, but Wednesday’s data shifted it lower, reflecting silver’s relative strength.
Shifting US Trade and Foreign Policies
Precious metals strategist Nicky Shiels at MKS Pamp noted that market sentiment suggests that as long as US stocks remain under pressure, the administration may continue to delay or reverse trade tariff measures. This came after President Biden’s administration had initially doubled import tariffs on Canadian steel and aluminum to 50% on Tuesday, only to reverse the move hours later. Senior White House trade advisor Peter Navarro encouraged Canada to ease tensions in the trade dispute.
Meanwhile, the US resumed military shipments and intelligence sharing with Ukraine, which had been halted following tense meetings between President Zelensky and the Trump administration. This resumption follows a ceasefire agreement between Ukraine and Western powers in Saudi Arabia, with US Secretary of State Marco Rubio stating that Russia’s response would provide crucial insight into their objectives.
Inflation Data and Fed Rate Expectations
The weak inflation data caused market expectations for the Federal Reserve to hold rates steady until July to rise, with the odds of no rate hike now standing at more than 1-in-4. However, this figure was still less than half the certainty expressed by the CME’s FedWatch tool this time last month.
Long-term US borrowing costs increased, with the yield on 10-year Treasury bonds rising to 4.32%, a two-week high despite the inflation miss.
Global Developments
In global news, Russia reclaimed its western border region of Kursk from Ukrainian forces and claimed to have neutralized a mass drone attack on Moscow, further escalating tensions in the ongoing conflict.
As markets digest these developments, the outlook for both precious metals and US economic policy remains uncertain, with shifts in inflation expectations and geopolitical tensions influencing investor sentiment.
Related topics:
- India Surpasses China in Gold Purchases, Buying 51% More in Three Months
- Qilu Bank Enhances Support for Small Businesses with Innovative Financial Tools
- Bitcoin Poised for a Surge Amid Gold’s Delivery Delays, Expert Claims
