Gold and silver edge higher on tame CPI print, now look to PPI

Outside Market Developments: U.S. CPI ticked up 0.1% in July, in line with expectations, versus -0.4% in June; 3.4% y/y, down from 3.5% in June. Core CPI rose 0.2% m/m, also in line, versus UNCH in June; 2.5% y/y, down from 2.6% in June.

While attention now shifts to Thursday's PPI release, the most recent evidence suggests inflation continued to moderate in July, further eroding expectations of Fed tightening. Fed funds futures now show the probability of a September rate hike is at 38.1%, down from 48.4% yesterday and 54.4% a week ago.

The market is anticipating a similar outcome for PPI, with modest month-over-month upticks and further annualized cooling. If that is indeed the outcome, a rate hike in September would become less likely, putting further pressure on yields and the dollar.

That being said, I believe the Fed's higher-for-longer tilt will prevail. In other words, a rate cut is not in the cards. Fed funds futures don't show any probability until late 2027. That could change if the labor market deteriorates further, resulting in growth risks.

U.S. stocks are mixed, with the S&P 500 and Nasdaq showing modest gains driven by strength in technology and AI-related shares, while the DJIA is slightly lower amid caution over upcoming economic data. Overall market sentiment remains cautiously optimistic as investors weigh generally favorable corporate earnings updates against persistent concerns about inflation and geopolitical risks.


GOLD

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$18.19 (+0.41%)
5-Day Change: +$162.60 (+3.83%)
YTD Range: $3,945.52 - $5,595.02
52-Week Range: $3,311.66 - $5,595.02
Weighted Alpha: +22.18

Gold eked out a new 10-week high in early U.S. trading, buoyed by a tame CPI reading that further sapped expectations for a September rate hike. Treasury yields are modestly lower, and the dollar index remains defensive below 100, providing additional lift for the yellow metal.



While gold is a bit overextended at this point, the tests above the 100-day moving average bode well for a short-term push to the 200-day MA at $4,507.06. That becomes even more likely if Thursday's PPI data are similarly tame. Further out, Fibonacci/chart resistance at $4,584.68/$4,594.43 would be in play.

In a new report, the World Gold Council called gold "the most effective commodity investment" because its dual role as a consumer good and monetary asset drives consistent returns, lower volatility, and unmatched portfolio diversification across all economic cycles.

Gold consistently outperforms broad commodity indices and major sub-indices over multi-year horizons while exhibiting significantly lower price volatility. During severe equity drawdowns or risk-off events, broad commodities tend to fall alongside stocks, while gold frequently decorrelates or moves higher, delivering asymmetric downside protection.

Gold is also a consistent inflation hedge, delivering positive real returns across both low and high inflation environments. Add to that the yellow metal's unparalleled liquidity and its ability to improve risk-adjusted returns, and you have an asset that should be a part of every portfolio. And yet, the WGC believes "most portfolios will have less than 1% exposure to gold."

I continue to be stunned by the limited allocation to gold (particularly physical). Why some choose to invest in a sequence of 1s and 0s stored in a digital wallet over gold in hand remains beyond me. Call me old-school. The positive takeaway, though, is there is massive room for growth in our industry.

In terms of support, I'm watching the 100-day MA at $4,390.02 on a close basis. Below that, today's overseas low at $4,362.75 protects Tuesday's low at $4,357.03. Below the latter, we find Monday's low at $4,313.86. 


SILVER

OVERNIGHT CHANGE THROUGH 6:00 AM CT: +$1.587 (+2.45%)
5-Day Change: +$4.179 (+6.74%)
YTD Range: $54.778 - $121.630
52-Week Range: $36.976 - $121.630
Weighted Alpha: +48.16

Silver edged to a seven-week high after the CPI data came out, underpinned by dimmed rate hike bets that pose a headwind for yields and the dollar. The white metal (and copper!) is also being helped by tech/AI optimism, which is bolstering industrial demand expectations.



Short-term tests of the declining 100-day MA at $68.868 and the still-rising 200-day MA at $71.711 remain favored. However, the market seems inclined to wait for tomorrow's PPI data, hoping for confirmation that a rate hike by year's end is off the table.

Key near-term resistance is around $80. An eventual push above this level would go a long way toward confirming that the corrective low is in, returning confidence to the underlying uptrend.

Today's overseas low at $64.684 marks initial support. Additional levels to watch are defined by recent daily lows: $64.239 (Tuesday), $63.004 (Monday), $61.175 (Friday) and $60.887 (Thursday).


Peter A. Grant
Vice President, Senior Metals Strategist
Zaner Metals LLC
312-549-9986 Direct/Text
[email protected]
www.zanermetals.com

Non-Reliance and Risk Disclosure: The opinions expressed here are for general information purposes only and should not be construed as trade recommendations, nor a solicitation of an offer to buy or sell any precious metals product. The material presented is based on information that we consider reliable, but we do not represent that it is accurate, complete, and/or up-to-date, and it should not be relied on as such. Opinions expressed are current as of the time of posting and only represent the views of the author and not those of Zaner Metals LLC unless otherwise expressly noted.