Bullion Dips as Hot PPI Hammers Bonds

Gold slipped and Treasury yields jumped overnight after a stronger-than-expected US Producer Price Index (PPI) reignited inflation concerns, dampening hopes of imminent rate cuts.

July PPI rose much faster than forecast on both the month and the year. Coming just a day after a friendlier CPI, which Trump was quick to promote, the jump in wholesale prices raised the risk that these prices earlier in the pipeline will flow into consumer price increases.

Rates markets reacted right away, while traders reduced the odds of a larger cut at the next Fed meeting. The harder rate backdrop and a steadier dollar put pressure on precious metals, leaving gold and silver in a beautiful dip.

Although gold and silver are expected to keep rising after rate cuts create unprecedented liquidity, this announcement has provided a rare opportunity to buyers:

Some on Wall Street still expect several cuts by the end of the year, but a fresh rise in producer prices gives hawks an excuse to defend rates being held up, especially if services inflation stays sticky.

Since its inception, the Fed has been successful in wildly exacerbating booms and busts. Gold and silver have acted as reliable hedges against both. For long-term investors, the noise about short-term data releases can simply act as an opportunity to buy the dip.