Precious metals plunge as inflation fears retreat

By Peter Bukov|

Published: June 14 2021, 09:16 GMT+0

Precious metals plunge as inflation fears retreat

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Friday saw some selling in gold and silver, and the trend continued on Monday. Both metals were circa 1% lower during the London session.

Gold is now testing the previous week’s lows at 1,855 USD, and if that support is broken down, further losses toward 1,800 USD could occur. The support for silver is at 27.50 USD, where the short-term uptrend line is located.

Last week’s massive CPI data led to a large slide in bond yields. Investors seem to be believing the “transitory” mantra, and they really think that the Fed has it under control. Additionally, lumber prices fell massively, further reinforcing the view that inflation has peaked. 

In that scenario, precious metals could be offered as they seem overbought, and the USD might strengthen further.

According to a Bloomberg survey, some 40% expect the Fed to take its first step toward tapering its current $120 billion in monthly bond purchases in late August when Chair Jerome Powell hosts a policy retreat in Jackson Hole, Wyoming. Another 24% see that happening the following month.

Sterling traders will pay attention to the BoE’s Governor Bailey speech, who is due to speak about at an online conference hosted by the Association of Treasurers later today.