(Kitco NewsWire) - Gold and silver prices were sharply lower in late U.S. trading Wednesday, as hotter-than-expected U.S. consumer inflation lifted Treasury yields, strengthened the dollar and increased expectations for further Federal Reserve tightening. Silver suffered particularly heavy losses as selling accelerated across precious metals. At the time of writing, spot gold was trading near $4,098.80 an ounce, down $61.30, or 1.47%, while spot silver was trading near $55.410, down $3.640, or 6.16%.
North American equities closed sharply lower as the inflation report triggered selling in technology and other rate-sensitive shares. The S&P 500 dropped 86.51 points, or 1.1%, to 7,718.94, its worst daily performance since July. The Dow Jones Industrial Average fell 48.62 points, or 0.1%, to 51,621.48. The Nasdaq Composite sank 511.51 points, or 1.9%, to 26,692.87, while the Russell 2000 declined 53.84 points, or 1.9%, to 2,729.53.
European equities closed mostly higher, outperforming Wall Street as strong corporate earnings helped offset the U.S. inflation surprise. The Stoxx Europe 600 gained 0.43% to 637.75, supported by a 2.3% advance in health care shares and stronger semiconductor-equipment demand. Germany's DAX added 0.2% to 25,298.61, France's CAC 40 climbed 0.6% to 7,873.11 and the U.K. FTSE 100 rose 0.7% to 10,724.86. Italy's FTSE MIB bucked the regional advance, falling 0.61% to 49,753.84.
Market positioning shifted materially after September consumer prices rose 0.6% on the month and 3.7% from a year earlier, exceeding the 3.6% annual consensus. Core inflation increased 0.3% month over month and 2.6% year over year, also above expectations. Gasoline prices jumped 9.1%, accounting for more than half of the monthly headline increase. The October Fed-hike probability climbed from roughly 20% before the release to nearly 40%, while markets continued to anticipate further tightening by year-end. The 10-year Treasury yield rose toward 5.3% before easing to the 5.27% area, and the dollar strengthened. Wednesday's Fed Beige Book reinforced the inflation concern, showing accelerating price increases in four districts, widespread fuel-related cost pressure and little net change in employment.
The next tests are Thursday's September PPI, retail sales and weekly jobless claims, followed by Friday's import and export prices and industrial production. Softer producer prices and weaker spending could temper the yield advance and stabilize gold; another upside inflation surprise would reinforce the tightening trade.
The Strait of Hormuz and U.S.-Iran situation remains a major source of energy-market uncertainty. Oil prices rose Wednesday after Iran-backed Houthi militants struck a Saudi Aramco administrative building in Dhahran, causing a fire but no reported casualties or direct disruption to oil production. Additional attacks on commercial vessels around Hormuz kept tanker security and Gulf export reliability in focus, while the absence of a durable resolution to the U.S.-Iran conflict sustained the supply-risk premium. Brent crude rose to $106.06 a barrel and WTI advanced to $95.09.
The transmission into precious metals remains unfavorable in the near term: geopolitical uncertainty supports defensive interest in gold, but elevated crude prices are feeding inflation expectations and reinforcing the case for higher interest rates. Silver faces the additional risk that persistently high energy and financing costs constrain industrial activity.
The key outside markets see Nymex WTI crude oil prices higher and trading near $95.09 a barrel, while Brent crude was near $106.06. The yield on the benchmark 10-year U.S. Treasury note is trading near the 5.27% area. The U.S. dollar index is firmer following the inflation report. (Kitco Global Index shows how much of today's gold move is the dollar versus the gold market itself.)
Technically, spot gold bulls’ next upside price objective is to push prices back above the $4,134.62 to $4,141.97 resistance zone, with a sustained move targeting $4,167.62 and then $4,217.40. Bears' next near-term downside price objective is a break below $4,066.54, with deeper downside targets at $4,060.37 and then $4,004.68. First resistance is seen at $4,114.00 and then at $4,134.62. First support is seen at $4,072.70 and then at $4,066.54.
Spot silver bulls’ next upside price objective is to drive prices back above the $56.550 to $57.640 area, with a move above that zone targeting $58.343 and then $59.541. The next downside price objective for the bears is a break below $55.270, with deeper downside targets at $55.000 and then $52.000. First resistance is seen at $56.000 and then at $56.550. Next support is seen at $55.270 and then at $55.000.
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