Gold and Silver Rise Ahead of a Crucial CPI Test

Spot gold has climbed back above $4,360 an ounce, while silver is trading around $64.16, with both metals gaining more than 1% intraday.

The move comes as markets await tonight’s U.S. CPI report, which could provide the next major signal for the Federal Reserve’s policy path. Economists expect headline CPI to rise 0.4% month-on-month and 3.4% year-on-year in August, while core CPI is forecast at 0.2% month-on-month and 2.4% year-on-year.

The backdrop is complicated. Thursday’s PPI data showed inflationary pressure accelerating, largely driven by higher energy costs, while markets have already raised the probability of a Fed rate hike next week to around 70%.

That puts tonight’s CPI firmly in focus.

A hotter-than-expected reading, particularly in core CPI, could reinforce expectations for tighter Fed policy and put renewed pressure on non-yielding assets such as gold and silver. But a softer reading could ease rate-hike expectations and give precious metals more room to extend their gains.

The key is that gold and silver are rising even as markets are pricing a higher chance of a Fed hike. That suggests the metals are being supported by more than just rate expectations, with elevated geopolitical and energy-market risks also keeping demand for defensive assets in focus.

Tonight’s CPI may therefore determine whether the current rally has room to run — or whether rising inflation expectations give the Fed another reason to tighten policy.