Gold, silver prices rise despite higher US inflation

Tuesday, October 18, 2016

Gold and silver prices rose on Tuesday despite higher US inflation.

The yellow metal ended US$3.40 higher at US$1,258.20/oz in London, with silver up 25 cents at US$17.65/oz.

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The improvements came despite a 0.3% increase in US consumer price index (CPI) inflation in September, or 1.5% over 12 months.

The rise, the highest in five months, increases the likelihood of a near-term interest rate hike, which would be negative for precious metals.

The US dollar rebounded to around 91 euro cents, having fallen to around 90.7 euro cents earlier in the day.


The positive gold and silver prices may reflect improved investor sentiment following a sharp sell-off.

Gold saw a reduction in net long positions of over 106,000 contracts in the last two reporting weeks, with gold ETF (exchange traded fund) demand weak, according to Commerzbank.

Gold and silver have fallen from September's averages of US$1,326/oz and US$19.28/oz, respectively.


"We believe that the selling pressure from speculative financial investors should abate, however," the bank said. "And the gold price appears to be stabilising just below the technically important 200-day moving average."

ABN AMRO expects gold to fall to around US$1,100/oz in June 2017 on investor jitters and expectations of near-term US rate hikes.