Gold and Silver Prices Steady as CPI Sheds Light on Fed's Rate Cut Plans

The US Bureau of Labor Statistics released its August consumer price index (CPI) figures on Wednesday (September 11), showing a 0.2 percent increase on a monthly basis and a 2.5 percent rise year-on-year.

Inflation rose 0.2 percent in July as well after a slight 0.1 percent decline in June. August’s numbers also mark the smallest 12 month increase since February 2021, when CPI came in at 1.7 percent.

The bureau said a 0.5 percent rise in shelter prices was the primary contributing factor to August’s increase, following a 0.2 percent rise in July. The gain was offset by a 0.8 percent decline in energy prices.

CPI isn't the US Federal Reserve's favored gauge for inflation — that would be the personal consumption expenditures price index — but is still an important tool for tracking price movements and their impact on consumers.

The Federal Open Market Committee next meets from September 17 to 18, and is widely expected to lower interest rates. However, there is still some uncertainty surrounding how big the cut will be.

CME Group's (NASDAQ:CME) FedWatch tool currently shows that 86 percent of market watchers are leaning toward a 25 basis point cut, with the remainder expecting a 50 basis point reduction.

“The uptick in core CPI has more or less cemented at 25 bps cut next week ... A new all-time high (for gold prices) may have to wait just a little longer,” Tai Wong, a New York-based independent metals trader, told Reuters.

Equity markets were mixed on the CPI news, with the S&P 500 (INDEXSP:.INX) losing 0.44 percent to reach 5,471 points, and the Dow Jones Industrial Average (INDEXDJX:.DJI) declining 0.91 percent to hit 40,359 points in morning trading.

The Nasdaq-100 (INDEXNASDAQ:NDX) remained largely flat with a 0.04 percent gain to 18,837 points.

Gold saw volatility following the release, but bounced back to a breakeven point of US$2,514 per ounce. Silver also saw some volatility, but recovered to post a 0.87 percent gain to US$28.62 per ounce.

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Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.