Hot US Inflation data hits Gold, Silver and Crypto markets

Gold and Silver prices tumbled as US inflation data turned out to be hotter-than-expected. The fresh data dampened expectations for near-term Federal Reserve rate cuts. It has also raised alarms for crypto markets that have rallied on hopes of easier monetary policy.

Spot Gold price dipped below $4,500 an ounce after US consumer and producer price data exceeded forecasts. Silver also posted one of its steepest one-day declines since 2020. Digital Gold, Bitcoin, price dropped marginally but added to the cumulative loss. BTC price is down by 5% over the last 7 days. 

Crypto, Gold and Silver tumble

According to the data, April US consumer prices rose 3.8% year-on-year. This is above the expectations of 3.7% set by the economists.  At the same time, producer prices jumped 6.0% whiile exceeding a 4.9% forecast.

The inflation surprise pushed the US dollar index above 99 for a fourth straight session. It went on to drive the 10-year Treasury yield up around 14 basis points to 4.596%. This marked the largest one-day increase in a year.

Gold price fell to as low as $4,480.01. It went to hit the weakest level seen since late March. However, it managed to recover and trade around $4,544 on Tuesday.

Silver prices came under heavier pressure. The metal slumped 9.03% on May 15 and extended losses below $74 an ounce on May 18. Thailand’s futures exchange reportedly temporarily suspended online silver futures trading amid the massive sell-off.

The global digital assets market saw some massive recoupling. The cumulative crypto market cap dropped below the $2.6 trillion mark. Its 24-hour trading volume stayed around $68 billion. It all comes in as a shocker as investors have increasingly treated bitcoin and other digital assets as inflation hedges similar to gold.

Rate-cut hopes fade as inflation pressure weighs

As of now, market expectations for near-term Federal Reserve easing have “largely faded”. Investors are also monitoring the upcoming transition in Federal Reserve leadership. Cryptopolitan reported that Kevin Warsh is scheduled to be sworn in as Fed chair on Friday. Traders are concerned that Warsh’s initial comments could push a hawkish tone after the inflation data.

Major banks maintained their longer-term bullish views on gold despite warning of additional near-term downside. JPMorgan lowered its average 2026 gold price forecast to $5,243 per ounce. It’s down from $5,708, but they still expect prices to rise above $6,000 before the end of the year.

Goldman Sachs maintained its year-end gold target of $5,400 in a May 16 note. It highlighted the expectation of central bank purchasing an average of 60 metric tons per month during the second half of the year.

Meanwhile, Goldman has also warned that gold prices could fall toward $4,400 if markets increasingly price in higher interest rates. Analysts suggest that the crypto market may face a similar pattern. 

Adding to pressure on bullion markets, India recently raised its import duties on gold and silver to 15% from 6%. India is the world’s second-largest gold consumer and largest silver importer.

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