Sharp decline in gold and silver prices after US PPI data

After the August Producer Price Index (PPI) data announced in the USA came in above expectations, there was a sharp decline in gold and silver prices.

According to US Department of Labor data, PPI increased by 0.4 percent monthly in August. The annual PPI increase increased to 5.4 percent, exceeding the market expectation of 5.3 percent.

While core PPI increased by 0.2 percent monthly in the same period, annual core PPI was 4.6 percent.

The rise in producer prices, especially due to energy costs, increased concerns about continuing inflationary pressures in the USA. The data also affected the expectations for the interest rate meeting of the US Federal Reserve (Fed) to be held on September 15-16.

OUNCE OF GOLD DECREASED TO 4 THOUSAND 328 DOLLARS

After the PPI data was announced, there were rapid sales in gold prices.

An ounce of gold, which started the day at 4 thousand 400 dollars, lost approximately 1.70 percent of its value after the data and fell to 4 thousand 328 dollars.

Gram gold fell from 6 thousand 860 liras to 6 thousand 742 liras. Quarter gold decreased to 11 thousand 60 liras, half gold decreased to 22 thousand 126 liras, and full gold decreased to 45 thousand 400 liras.

THE LOSS IN SILVER EXCEEDED 4 PERCENT

Selling pressure was felt harder in the silver market.

Ounce silver dropped to 64 dollars with a loss of more than 4 percent following the PPI data. Gram silver started to be traded around 100 TL.

EYES ON US INFLATION DATA

The focus of the markets is now on the August Consumer Price Index (CPI) data to be announced in the USA.

The consumer inflation data that will follow PPI is of critical importance in terms of expectations regarding the step the Fed will take regarding interest rates at its September 15-16 meeting.

According to market pricing, the probability of the Fed increasing interest rates is over 60 percent. According to Reuters, the possibility of an interest rate increase following the PPI data was priced at 62 percent.

While high inflation and the increase in bond yields reduce the appeal of gold, which does not bear interest, the strengthening of the dollar also puts pressure on the precious metal.

THE NEXT CRITICAL THRESHOLD FOR GOLD

The next critical data in terms of the direction of gold and silver prices will be the US CPI figures for August.

If consumer inflation is above expectations, the expectation that the Fed will follow a tighter monetary policy may be expected to strengthen and the selling pressure on precious metals will increase.