Sticky Inflation Is Fueling Gold’s Rise—But It Won’t Stop There (week ending 2/28/2025)

A Daily Journey Through the Week's Market

Monday, 2.24.25: Gold prices hit another all-time high Monday before pulling back slightly, with April gold up $7.20 at $2,960.10, while March silver lagged, dropping $0.392 to $32.625. Safe-haven demand, technical buying, and ETF purchases are driving gold higher, fueled by geopolitical tensions, including an unstable Israel-Hamas ceasefire, uncertainty over Russia-Ukraine ceasefire talks, and U.S. trade protectionism concerns. 

Tuesday, 2.25.25: Gold and silver prices tumbled Tuesday on heavy profit-taking and weak long liquidation, with silver suffering chart damage that could be an early bearish signal for gold. While gold bulls need to stabilize the market soon to avoid technical breakdowns, no serious chart damage has occurred yet. U.S. stock indexes also fell amid heightened risk aversion after President Trump signaled tariffs on Mexican and Canadian imports and pushed allies to tighten restrictions on China’s chip industry, though this uncertainty has not benefited precious metals bulls.

Wednesday, 2.26.25: Gold and silver prices rebounded Wednesday as bulls stabilized the market after Tuesday’s sharp losses, with April gold up $11.40 at $2,930.20 and March silver rising $0.449 to $32.275. The U.S. dollar index edged higher, while Nymex crude oil hit a two-month low at $68.75 a barrel, and the 10-year Treasury yield stood at 4.3%. Market focus now shifts to key U.S. economic data, including inflation figures from the PCE price index on Friday.

Thursday, 2.27.25: Gold prices dropped sharply Thursday, hitting a two-week low as short-term traders took profits, with April gold down $27.90 at $2,902.30. Silver also edged lower, losing technical momentum, with March silver down $0.097 at $32.175. While bullish fundamentals remain, gold lacks fresh catalysts to sustain its rally, a key factor in any strong bull market.

Friday - 2.28.25: Gold and silver prices dropped sharply in early U.S. trading Friday, with gold hitting a three-week low and silver a four-week low due to profit-taking and weak long liquidation by short-term traders. April gold fell $28.20 to $2,867.70, while May silver dropped $0.425 to $31.685. The January PCE inflation index rose 2.5% year-over-year, matching expectations and easing fears of hotter-than-expected inflation. Markets showed little reaction, though Barron’s noted the data could support future Fed rate cuts.

Gold Struggles as Stagflation Risks Rise—But Could It Stage a Comeback?

Gold prices remain under pressure as investors take profits, even as economic data signals growing stagflation risks with rising inflation and falling consumer spending.

What’s happening:

• Core PCE inflation, the Fed’s preferred gauge, rose 0.3% in January, up from 0.2% in December, in line with expectations.
• Over the past 12 months, core inflation stood at 2.6%, slightly lower than December’s reading.
• Personal spending unexpectedly dropped by 0.2%, missing forecasts of a 0.2% increase.
• Personal income jumped 0.9%, more than double expectations of 0.4%, suggesting consumers may be saving more amid economic concerns.
• Spot gold futures fell 0.73% to $2,855.60 an ounce as investors trimmed bullish positions.

The big picture:

The U.S. economy is sending mixed signals—stubborn inflation, slowing spending, and rising personal income create a challenging scenario for the Federal Reserve. Stagflation fears are growing, with analysts arguing that this environment should favor gold as a hedge against economic uncertainty. Lower real interest rates typically support gold prices, but investors are hesitant, anticipating the Fed's next move.

Market reaction:

While some analysts say gold’s long-term outlook remains strong due to economic uncertainty, others note that inflation below 3% could shift the Fed’s focus toward economic support, making rate cuts more likely. However, Capital Economics’ Thomas Ryan warns that inflationary pressures and tariff risks could keep rate cuts off the table, complicating gold’s trajectory.

Sticky Inflation Is Fueling Gold’s Rise—But It Won’t Stop There

With inflation deeply embedded in the U.S. economy, gold prices continue to surge, reflecting rising global demand and concerns over monetary stability.

What’s happening

• Gold has risen nearly 7% since Trump’s inauguration, now trading above $2,900 per ounce.
• Inflation remains persistent, with price levels rising over 20% in the past four years.
• Central banks worldwide are aggressively accumulating gold, particularly in China, India, and Russia.
• Gold investments remain underrepresented, accounting for less than 1% of global assets.
• Gold miners are undervalued, creating opportunities for investors beyond physical bullion.

The big picture

Gold’s meteoric rise reflects deeper structural issues in the global economy. The U.S. dollar has lost 145x its purchasing power since 1914, and inflation remains far above the Fed’s 2% target. While Trump’s administration, alongside Elon Musk, is pushing spending cuts, the sheer scale of government obligations—Medicare, Medicaid, and Social Security—means inflationary pressures aren’t going away. Central banks are increasingly rejecting the U.S. dollar, turning to gold as a hedge against instability.

Market reaction

Gold remains in a long-term uptrend, driven by persistent inflation, central bank demand, and underinvestment in the precious metals sector. As mainstream investors begin shifting capital into gold and mining stocks, prices could see significant upside potential, making now an opportune time to build exposure.

Gold’s Rally May Fade, but Silver’s Supply Crunch is Just Beginning

Gold remains in a rare market anomaly, rallying despite a strong U.S. dollar, while silver faces an unprecedented supply deficit that could drive long-term gains, according to TD Securities’ Daniel Ghali.

What’s happening

• Gold prices are rising even as the U.S. dollar strengthens, an unusual market dynamic.
• Ghali sees gold as benefiting in all scenarios, either as a hedge against currency depreciation in Asia or as a traditional safe-haven asset in a weakening dollar environment.
• The “melt-up” in gold is likely temporary, with macro funds driving the rally when U.S. rates decline.
• Silver is in its fifth consecutive year of a structural deficit, largely due to booming solar panel demand.
• A liquidity crisis in silver markets is emerging, as physical metal is being pulled from London into the U.S., tightening global supplies.

The big picture

Gold’s unusual rally is historically rare, occurring only in extreme economic shifts like the 1933 gold revaluation and the 2009 quantitative easing boom. While its short-term setup is strong, Ghali warns that this anomaly won’t last indefinitely. Meanwhile, silver’s supply issues are becoming severe, with London’s bullion vaults facing depletion. Unless prices rise to attract new supply, the silver market could see further disruptions.

Market reaction

Gold’s upside remains intact for now, but traders should be cautious of a potential reversal. Silver, on the other hand, is experiencing a genuine supply squeeze that could drive long-term price appreciation, making it an attractive opportunity for investors seeking exposure to precious metals.

India and China Dump U.S. Treasuries for Gold

Two of the world’s largest economies are accelerating their shift away from the U.S. dollar, ditching Treasury bonds in favor of gold, raising concerns about de-dollarization.

What’s happening

• India and China have aggressively increased gold reserves while reducing their U.S. Treasury holdings.
• India has tripled its gold reserves in the last decade, now valued at $70.9 billion.
• China’s gold reserves hit a record $73.5 billion, more than doubling over the last 10 years.
• Global gold demand surged 24% year-over-year in 2024, reaching a record $382 billion.
• Donald Trump has reintroduced 25% tariffs on Mexico and Canada, stoking fears of a global trade war.

The big picture

China and India’s move away from U.S. Treasuries signals a broader global shift away from the dollar as the dominant reserve currency. The trend aligns with rising geopolitical tensions and Trump’s tariff escalations, which have increased economic uncertainty. As more nations diversify into gold, the foundation of the U.S. financial system—dollar hegemony—could face long-term challenges.

Market reaction

Markets have reacted negatively to Trump’s tariff moves, with Bitcoin dropping below $92K and erasing $340 million in market value. Meanwhile, gold demand remains at record highs, reinforcing its status as a global safe-haven asset amid rising economic and political uncertainty.

Why are banks flying gold bars from London to NYC?

Major banks are moving physical gold from London to New York to exploit a price disparity between the two markets, using commercial flights to transport billions in gold bars.

What’s happening

• Gold prices in New York have been higher than in London, creating an arbitrage opportunity.
• JPMorgan Chase and HSBC are shifting reserves to capitalize on this gap.
• JPMorgan plans to move $4 billion in gold to New York in February.
• Trump’s tariff plans on U.S. trading partners have increased economic uncertainty, fueling demand for gold.
• Gold futures are up more than 10% in 2025 and over 44% from a year ago.

The big picture

London remains the world’s key physical gold trading hub, while New York dominates the futures market. The recent price gap—about $20 per troy ounce—has pushed banks to physically transport gold across the Atlantic. Moving gold helps banks hedge futures trades that would otherwise result in losses.

Market reaction

Gold prices have surged to record highs, reflecting rising economic uncertainty. As banks shift gold to New York, futures trading activity is expected to remain elevated, with investors watching for further price disparities and tariff-driven volatility.

Next Week’s Key Events

Economic Calendar: January 20–24

Monday, March 3

• 9:45 AM ET – S&P Final U.S. Manufacturing PMI (Feb.)
• 10:00 AM ET – ISM Manufacturing (Feb.)
• 12:35 PM ET – St. Louis Fed President Musalem speaks

Tuesday, March 4

• 2:20 PM ET – New York Fed President Williams speaks
• TBA – Richmond Fed President Barkin speaks

Wednesday, March 5

• 8:15 AM ET – ADP Employment (Feb.)
• 9:45 AM ET – S&P Final U.S. Services PMI (Feb.)
• 10:00 AM ET – ISM Services (Feb.)

Thursday, March 6

• 8:30 AM ET – Initial Jobless Claims (March 1)
• 7:00 PM ET – Atlanta Fed President Bostic speaks

Friday, March 7

• 8:30 AM ET – U.S. Jobs Report (Feb.)
• 10:45 AM ET – New York Fed President Williams speaks
• 3:00 PM ET – Consumer Credit (Jan.)

 

IMPACT ON PRECIOUS METALS MARKETS

Manufacturing and Services Reports (S&P and ISM)

Strong manufacturing and services data typically signal economic growth, which can strengthen the U.S. dollar and weigh on gold and silver prices. Conversely, weak reports may fuel recession concerns, increasing demand for precious metals as safe-haven assets.

Fed Speeches

Fed officials’ statements can strongly influence gold and silver, particularly if they signal future rate hikes or dovish policy shifts. Hawkish rhetoric (supporting higher interest rates) tends to pressure precious metals as higher rates make non-yielding assets like gold less attractive. Dovish statements can drive gold and silver higher as lower rates weaken the dollar.

ADP Employment Report

This report provides an early estimate of private-sector job growth. A strong report may indicate a healthy labor market, strengthening the dollar and pressuring gold. Weak numbers could increase recession fears, driving safe-haven demand.

Initial Jobless Claims

A rise in jobless claims signals labor market weakness, potentially boosting gold and silver as economic uncertainty rises. Lower claims may indicate economic strength, pressuring metals.

U.S. Jobs Report

A strong jobs report supports higher interest rates, which can strengthen the dollar and weigh on gold and silver. A weak report could push metals higher as traders price in potential rate cuts or economic slowdowns.

Consumer Credit

Rising consumer credit may indicate strong spending, reducing the need for safe-haven assets like gold. A sharp slowdown in credit growth could reflect consumer financial stress, potentially supporting gold and silver.