Gold Steadies Near One-Month High Amid Soft Inflation Data (week ending 1.17.25)

A Daily Journey Through the Week's Market

Monday - 1.13.25: Gold prices declined slightly, with spot gold at $2,684.39 per ounce, as a stronger U.S. dollar weighed on the market. The greenback surged following a robust jobs report, reinforcing expectations that the Federal Reserve would maintain current interest rates. Silver prices followed suit, falling 0.6% to $29.80 per ounce.

Tuesday - 1.14.25: Gold prices rose to $2,674.26 per ounce, supported by uncertainty surrounding U.S. President-elect Donald Trump’s policy plans and investor anticipation of key U.S. inflation data. Silver prices edged higher, closing at $30.57 per ounce, as market participants awaited economic signals that could impact Federal Reserve rate decisions.

Wednesday - 1.15.25: Gold edged down to $2,675.72 per ounce as traders stayed cautious ahead of the U.S. inflation report. Investors eyed signals on Fed policy, with stubborn inflation possibly delaying rate cuts. Silver dipped 0.2% to $30.51 per ounce on similar worries.

Thursday - 1.16.25: Gold prices held steady near a one-month peak at $2,693.93 per ounce, buoyed by subdued U.S. core inflation data, which raised expectations for additional Federal Reserve rate cuts. Silver prices remained flat at $30.66 per ounce as traders assessed the implications of softer inflation on monetary policy and market liquidity.

Friday - 1.17.25: Gold and silver prices dipped Friday on profit-taking after hitting four-week highs. U.S. stock indexes are set to open firmer after a rally driven by tame inflation data, while the UK’s FTSE 100, Germany’s DAX, and Euro Stoxx 50 hit record highs. China’s economy grew 5% in 2024, aided by Q4 stimulus and accelerated exports.

Gold Steadies Near One-Month High Amid Soft Inflation Data

Gold prices held firm near a one-month peak this week, bolstered by U.S. inflation reports that came in slightly below expectations. The subdued Producer Price Index (PPI) and Consumer Price Index (CPI) figures have reinforced market expectations for potential Federal Reserve interest rate cuts in 2025.

Driving the News

• PPI Data: The U.S. PPI rose 3.3% annually in December, marginally below the anticipated 3.4%. This slight cooling suggests easing inflationary pressures at the production level.

• CPI Data: The Consumer Price Index showed an annual increase of 2.9% in December, the highest rate since July. Despite the uptick, the figure aligns with the Federal Reserve's broader inflation outlook.

• Market Reaction: In response to the inflation data, spot gold remained steady at $2,693.93 per ounce, while U.S. gold futures edged up 0.2% to $2,723.70. The data has led traders to anticipate potential rate cuts by the Federal Reserve, possibly as early as June 2025.

The Bottom Line

The recent inflation reports have strengthened the case for a more accommodative monetary policy stance from the Federal Reserve. This environment is supportive of gold prices, as lower interest rates tend to enhance the appeal of non-yielding assets like gold. Investors are closely monitoring upcoming economic indicators to gauge the Fed's next moves.

Fed’s Waller Sees Multiple Rate Cuts in 2025—What It Means for Gold and Silver

Federal Reserve Governor Christopher Waller signaled that interest rate cuts could come sooner and in greater numbers than markets currently anticipate, provided inflation continues to ease. Speaking to CNBC, Waller suggested three to four cuts could be on the table this year, depending on economic conditions.

Driving the News

• Rate cut expectations shift: Waller indicated that the first rate cut could come in the first half of 2025, with additional reductions likely if inflation declines as expected.
• Market reaction: Traders responded by increasing bets on a more aggressive rate-cutting cycle. Market-implied odds for a May cut jumped to 50%, while expectations for a second reduction by year-end climbed to 55%.
• Inflation outlook: Waller remains more optimistic than some of his Fed colleagues, predicting that inflation—despite its recent stickiness—will continue to trend toward the Fed’s 2% target.

Impact on Gold and Silver

• Gold’s upside potential: Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, potentially pushing prices higher. If the Fed embarks on multiple cuts, gold could break out beyond its current highs, especially if economic uncertainty lingers.
• Silver’s mixed outlook: A more dovish Fed generally supports silver, but industrial demand remains a key factor. If rate cuts fuel economic growth, silver could benefit from increased industrial consumption. However, Bloomberg’s Mike McGlone recently warned that silver may continue underperforming gold due to weaker demand from China.
• Safe-haven demand: If aggressive rate cuts signal economic instability, investors may flock to gold and silver as hedges against uncertainty, reinforcing their appeal.

What’s Next

At the Fed’s December meeting, policymakers penciled in two cuts for 2025, but Waller’s comments suggest a more flexible approach. The next Federal Open Market Committee (FOMC) meeting on Jan. 28-29 is unlikely to produce an immediate move, with Waller emphasizing the Fed is "in no rush to do things."

The Bottom Line

If inflation continues to ease, Waller sees room for multiple cuts this year—potentially more than the market expects. This could be bullish for gold, while silver’s performance may depend on industrial trends. However, if inflation remains stubborn, the Fed may stay cautious, limiting precious metals' upside potential.

Silver Set to Outshine Gold in 2025?

Gold is set for another strong year in 2025, but silver may have the edge, according to Kirill Kirilenko, Senior Analyst at CRU. While gold prices are expected to average around $2,580 per ounce, silver’s tightening fundamentals could push it slightly ahead.

Driving the News

Kirilenko highlights inflation, the U.S. dollar, economic slowdowns, and geopolitics as key factors influencing gold’s trajectory. While he remains bullish, he does not anticipate gold reaching $3,000 per ounce, citing stabilizing political uncertainty under President-elect Donald Trump. He also points to Trump’s focus on cryptocurrencies as a potential challenge to gold’s role as an alternative global currency.

The Silver Lining

Silver is projected to average $31.35 per ounce in 2025, benefiting from strong demand tied to the green energy transition. However, Kirilenko warns that the solar PV sector—a major driver of silver demand—may have peaked, as efficiency improvements reduce the metal’s usage.

The Bottom Line

While gold remains a key safe-haven asset, silver’s fundamental outlook suggests it may outperform. Both metals, however, face a volatile year ahead.

Gold Surges as Philly Fed Index Skyrockets

Gold prices hit session highs after the Philadelphia Federal Reserve's manufacturing survey surged to 44.3 in January, a sharp rebound from December’s -10.9 reading. The unexpectedly strong data signals a robust manufacturing sector, pushing spot gold to $2,715.23, up 0.70% on the day.

Driving the News

The Philly Fed report showed significant improvements across key manufacturing indicators: new orders, shipments, and employment levels all rose sharply. The new orders index jumped 47 points to 42.9, its highest since November 2021, while shipments hit a high not seen since October 2020. Employment also edged up, with the workweek index hitting its best level since March 2022.

Price Pressures Rising

Firms reported broad price increases, with the prices paid index climbing to 31.9, its highest level since December 2022. Meanwhile, the prices received index shot up 24 points to 29.7, marking its highest reading since January 2023. Nearly 35% of firms raised prices on their goods, reflecting continued inflationary pressures.

The Bottom Line

Gold’s rally underscores its role as a hedge against inflation and economic uncertainty. With manufacturing data surpassing expectations and price pressures rising, investors are closely watching how the Fed will navigate inflation concerns in the months ahead.

Bitcoin’s Peak? What’s Next for This ‘Highly Speculative Asset’

After a record-breaking 2024, Bitcoin may struggle to maintain momentum in 2025, warns Bloomberg Intelligence’s Mike McGlone. While the cryptocurrency soared past $100,000 last year, benefiting from ETF approvals, a halving event, and political endorsements, McGlone believes the best days may be behind it. Meanwhile, gold could be poised for a major breakout if equity markets correct.

Driving the News

• Bitcoin’s banner year: McGlone calls 2024 “as good as it gets” for Bitcoin, pointing to historic tailwinds like the U.S. launch of Bitcoin ETFs and a shift in political sentiment. However, he warns that speculative excesses may cool, leading to a reversion in 2025.
• Gold’s undervaluation: Despite Bitcoin’s gains, McGlone sees gold as relatively cheap. He highlights the S&P 500-to-gold ratio at 2.2—historically high compared to its average of 1—suggesting gold is undervalued against equities.
• Stock market risks: A significant equity correction could be the catalyst that drives gold past $4,000. McGlone notes the stock market’s market cap-to-GDP ratio has hit its highest level in a century. Even a 10% pullback, he says, could be enough to send gold soaring.
• Central bank buying spree: Global central banks purchased 1,250 tons of gold in 2024, with China ramping up purchases to reduce reliance on the U.S. dollar. Gold-backed ETFs also saw their first net inflows since 2019, signaling renewed institutional demand.

Contrarian Silver Outlook

McGlone remains unimpressed by silver’s performance, noting that despite rising 28% in 2024, it failed to outperform gold—a concerning sign given silver’s historical role as “leveraged gold.” He attributes this weakness to softer industrial demand from China and lingering deflationary pressures. This perspective contrasts with other analysts who forecast higher silver prices in 2025, driven by industrial demand and supply constraints. For instance, Saxo Bank predicts silver could reach $40 per ounce, and the World Bank anticipates a 7% price rise. 

The Bottom Line

Bitcoin’s meteoric rise in 2024 may be hard to repeat, while gold could benefit if markets correct. With equities at historic highs and central banks continuing to buy gold, 2025 could be a defining year for both assets. Investors will be watching closely for signs of reversion in Bitcoin and a potential breakout in gold.

Gold Eyes $3,000 as Economic Uncertainty Mounts

Gold may be stuck below $2,700 for now, but fund manager Chris Mancini sees no shortage of bullish catalysts ahead. With inflation still a concern and economic risks rising, he believes gold is primed to hit $3,000 in 2025—while mining stocks could finally see their long-awaited breakout.

Driving the News

• Inflation fears persist: Mancini warns that President-elect Donald Trump’s proposed tax cuts and global tariffs could fuel inflation, keeping gold in demand as a hedge.
• Labor market is key: While the Fed’s rate cut expectations remain limited, Mancini says a weakening labor market could force the central bank’s hand, especially if stagflation concerns take hold.
• Global trade war risk: A prolonged trade dispute could drag on economic growth, adding more safe-haven appeal to gold.

Mining Stocks Back in Focus

Despite gold’s strong 27% rally in 2024, mining stocks have lagged. Mancini believes this trend is about to reverse as mining companies improve cost management and regain investor confidence.

• Sentiment shift: After years of underperformance, Mancini sees mining stocks as poised for a turnaround, especially if gold nears $3,000.
• M&A potential: He advises investors to focus on smaller, high-quality producers that could become attractive acquisition targets for larger firms looking to expand.

The Bottom Line

If inflation stays elevated and economic uncertainty persists, gold could make a run at $3,000, pulling mining stocks up with it. Investors wary of missing the next leg higher may start turning their attention to the sector sooner rather than later.

Next Week’s Key Events

Economic Calendar: January 20–24

Monday, January 20

• No reports scheduled (Martin Luther King Jr. holiday)

Tuesday, January 21

• No reports scheduled

Wednesday, January 22

• 10:00 AM – U.S. Leading Economic Indicators (Dec.)

Thursday, January 23

• 8:30 AM – Initial Jobless Claims (Jan. 18)

Friday, January 24

• 9:45 AM – S&P Flash U.S. Services PMI (Jan.)
• 9:45 AM – S&P Flash U.S. Manufacturing PMI (Jan.)
• 10:00 AM – Existing Home Sales (Dec.)
• 10:00 AM – Consumer Sentiment (Final, Jan.)

 

IMPACT ON PRECIOUS METALS MARKETS

U.S. Leading Economic Indicators: This report provides a broad measure of future economic conditions by analyzing various economic data points. If the indicators show signs of economic weakness, investors may seek safe-haven assets, pushing gold and silver prices higher. Conversely, strong readings that suggest economic expansion could reduce demand for precious metals as risk appetite increases.

Initial Jobless Claims: A key labor market indicator, this report tracks the number of individuals filing for unemployment benefits. Higher-than-expected claims can signal economic distress, increasing demand for gold and silver as safe-haven assets. In contrast, lower claims indicate job market strength, which could weigh on precious metals as investors shift toward riskier investments.

S&P Flash U.S. Services PMI: This preliminary report measures economic activity within the service sector. Strong PMI readings suggest expansion and economic stability, which may reduce demand for gold and silver. However, weak service sector performance could trigger concerns about an economic slowdown, boosting demand for safe-haven metals.

S&P Flash U.S. Manufacturing PMI: This report provides an early assessment of manufacturing sector activity. A strong reading typically reflects economic growth and stability, which can diminish the appeal of gold and silver as investors move toward equities and other risk assets. Conversely, weak manufacturing performance could heighten recession fears, increasing the attractiveness of precious metals.

Existing Home Sales: This report tracks the number of home sales in the previous month, serving as a key indicator of consumer confidence and economic health. Higher sales suggest a strong economy, which can put downward pressure on gold and silver prices. Conversely, declining home sales may signal economic uncertainty, boosting demand for precious metals as a hedge against instability.

Consumer Sentiment: This report gauges consumer confidence based on survey data. Strong sentiment typically signals economic stability, reducing gold and silver demand as investors favor growth assets. On the other hand, weak consumer sentiment reflects uncertainty, increasing safe-haven demand for gold and silver.