Gold Reaches Two-Month High on Easing Inflation Pressures Before Retreating
Gold hit a two-month high of $4,450 on Wednesday after July's Producer Price Index (PPI) data showed annual producer prices cooling from 5.5% to 4.7%. However, gold retreated by about $32 to $4,376 per ounce on Thursday as energy costs reminded traders that the inflation story is not entirely finished.
The Bureau of Labor Statistics released the July PPI report, which revealed that final demand prices came in unchanged month-over-month and annual producer prices rose 4.7%. The composition of the data told a more nuanced story: goods prices fell 0.7% in July while services rose 0.2%, with energy's decline within goods contributing to the headline improvement.
The narrower core measure, which strips out food, energy, and trade services, climbed 0.4% month-over-month after barely moving in June, drawing more Fed attention than the headline number. The retreat of gold reflects a straightforward calculation: services inflation and elevated energy costs mean the Fed has not yet received a clean all-clear.
Citi analysts reiterated a $90 per ounce target for silver over the next six to twelve months, expecting investment demand to take over from industrial demand as the primary price driver. They also forecasted a global silver market deficit through 2027, driven by resilient demand from artificial intelligence infrastructure, 5G networks, and electric vehicles.