April 2024: Sticky Inflation Tempers Rate Cut Expectations, Yet Gold and Silver Prices Gain

Gold prices surprised observers in April, posting record prices and a monthly gain despite the shrinking odds of the Federal Reserve cutting interest rates soon. Eastern demand provided underlying support for the gold price. Silver prices rallied strongly.

Strong employment and inflation data pushed interest rates and the US dollar higher. Equities fell.

Gold prices traded new record highs in 8 of April’s first 10 trading days.

The threat of Iran striking Israel likely drew buyers to the market. On the 12th, Gold prices traded at a record $2,448.80. Silver prices traded at $30.19 (a two-year high). But the Iranian attack on the 13th had been telegraphed and thwarted, and the prospect of rate cuts was waning. On the 22nd, gold prices shed 2.80% to $2,346.40. Silver prices lost 5.53% to $27.52. (These prices are from CME most active contracts).

These are quite arguably still lofty prices, and Fidelitrade has seen some take profits. (This is an observation, not advice). Premiums are modest, and supply is ample for coins and small bars.?

Despite the price point, Chinese demand is strong. The central bank bought for the 17th straight month in March. Chinese consumers are buying gold instead of property and equities.

Looking ahead

• Will public debt come to the forefront at some point--perhaps around the election??

• With the recent strong economic data, can there be rate cuts this summer??

• Morgan Stanley says the possibility of a recessionary hard landing is now as high as 25-30%. Do you agree? Here is how gold performs in different inflationary environments:

Jennifer Ropiak is a precious metals market specialist with over 30 years’ experience, including 20 years of trading (15 at Morgan Stanley). In 2014, Jennifer launched Trusted Partner Metals, an independent consultancy whose clients span the metals industry.?

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