Gold, Silver Slip as Surprise US Inflation Boosts Dollar, Fed Rate Forecasts

GOLD and SILVER PRICES slipped against a rising US Dollar on Wednesday after stronger than expected inflation data sent interest rates rebounding in the bond and futures markets.

US economic growth was confirmed at just 1.5% annualized for April-to-June, the slowest real terms Q2 pace in 4 years, thanks to inflation leaping to 6.4% per year on the GDP Price Index.

July then saw US inflation on the core PCE measure − currently targeted at 2.0% by the Federal Reserve − jump 0.3 percentage points to 3.7%, rather than holding unchanged as analysts forecast.

Today's rising inflation data saw the US Dollar rally 0.2% on its trade-weighted DXY currency index, while US Treasury bond yields rallied from 3-week lows as the price of Washington's debt fell.

The price of silver bullion repeated yesterday's drop below last week-end's level, dipping to $68 per troy ounce.

Gold dropped as low as $4600 per troy ounce before rallying $20, trading 1.6% beneath Tuesday's fresh 15-week price high.

Trading in Fed Funds futures raised the odds of a rate increase at next month's central-bank meeting to 2-in-5, the highest in a fortnight, and edged the market's year-end consensus forecast 1 basis point higher to 3.89%.

That would require 1 rate rise of 25 basis points from the current effective Fed Funds rate.

"Gold is a clear beneficiary of de-dollarization," said a note overnight from the investment team at Swiss banking giant and bullion clearer UBS, "as investors consider bullion a reliable store of value and an alternative to traditional reserve currencies."

Already making the steepest monthly gold price jump since 1999 excluding this January's spike, "we think gold can continue to climb amid further pressure on the US Dollar," UBS goes on.

"We also expect markets to scale back their expectations for Federal Reserve rate hikes, which should support gold."

"Improving momentum, renewed investor demand, and a softer US Dollar are strengthening the case for gold and silver," agreed Swiss private bank Julius Baer last week.

"Cooling US labour market conditions are easing inflation pressures...In our view, the recovery in both gold and silver still has further room to run."

US equities meantime held little changed ahead of AI chip-making behemoth Nvidia (Nasdaq: NVDA) releasing its Q2 earnings report.

Crude oil fell again, dropping 8.5% from Friday's 3-month high, as Qatar and Iran said they had agreed a new path for shipping through the Strait of Hormuz, but without re-opening the lane entirely with US de-escalation.

Copper slipped back from Tuesday's fresh all-time record Nymex high on the US futures market, led by the return of 2025's Trump administration import tariffs threats driving record levels of precautionary stockpiling in US warehouses.

Today's GDP Price Index data marked the fastest such inflation since 1981 outside the post-pandemic inflation of end-2021 to mid-2022.