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Gold & Silver Vulnerable to Strong CPI


Unfortunately for the gold bulls, the market has been presented with several negative issues this morning in the form of a stronger dollar, fresh chart damage and fears of pressure following today’s US inflation report. On the positive side of the ledger, the gold trade is supported by news that one in 5 global central banks plan to purchase gold this year and gold ETF holdings increased yesterday and narrowed the year-to-date liquidation tally. While we doubt that the gold and silver markets will benefit from news that countries with large vaccination percentages are beginning to give vaccine doses to poor countries, that action should help speed the end of the global pandemic particularly in the world’s second-largest gold consuming country of India.


In addition to negative charts from the last 2 weeks action, the PGM markets are presented with news that South African PGM production jumped by 276% in April versus year ago levels. Certainly, year-over-year comparisons are highly subjective especially given the shutdown in mining operations last year to contain the spread of the virus.


In retrospect, it appears the surge in Chinese producer prices sparked concern that the Chinese government would move to deflate important material costs, but some analysts think China might only create short-term volatility by announcing restricted purchases or selling reserves. In fact, Beijing is considering price caps and that has not been a solution to higher prices in the past.

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