CPI surprises to the downside

Gold and silver were trading in positive territory for most of this morning, but prices were constrained within tight price ranges. Most traders are sitting on their hands ahead of today’s key US inflation update and the Fed’s rate decision. Yesterday saw gold end higher while silver was lower, which was a fair summation of what has been happening since Friday’s unexpectedly sharp decline in both. While gold found some decent support yesterday, spending most of the session north of $2,300, silver’s position appeared more fragile. Silver’s daily MACD remains in overbought territory, although this situation is getting closer to resolving. Silver came close to breaking below $29.00 on several occasions, but in each instance the buyers came in to defend the line.
Both metals exploded higher following the release of lower than expected CPI data. Both the Core and Headline readings slipped back from the previous months’ numbers. Stock indices also flew higher while the US dollar slumped. Bond yields fell sharply and, according to the CME’s FedWatch Tool, the probabilities rose of two rate cuts this year, with the first coming in September. Gold and silver pulled back from their best levels as the afternoon wore on. While this is undoubtedly positive news for precious metals, and risk assets in general, traders will now focus on tonight’s FOMC monetary policy meeting. Key to this will be the FOMC’s quarterly Summary of Economic Projections (SEP). These will be studied for significant changes from the previous update in March.