(Kitco NewsWire) – Spot gold and silver prices were higher in early U.S. trading Wednesday, recovering from Tuesday's sharp losses as bargain hunting and short covering supported precious metals despite elevated Treasury yields and a firmer U.S. dollar. The recovery followed stronger-than-expected U.S. inflation data that reinforced expectations for another Federal Reserve rate increase in December, while renewed concerns about shipping disruptions in the Strait of Hormuz provided some underlying support for defensive assets. Spot gold was trading near $4,042.50 an ounce, up $10.70, or 0.27%, while spot silver was trading near $52.690, up $1.270, or 2.47%.
Tuesday's U.S. consumer price index increased 0.4% in October, exceeding expectations for a 0.3% gain, while core inflation rose 0.3%, above forecasts for a 0.2% increase. Shelter costs increased 0.3%, food prices advanced 0.5% and energy prices rose 0.7%, indicating continued inflation pressure across several categories. The Bureau of Labor Statistics did not publish annual October inflation rates because comparable observations were unavailable following the October 2025 government shutdown. The inflation surprise followed Friday's stronger-than-expected employment report, which showed 165,000 new jobs in October, unemployment falling to 4.1% and average hourly earnings increasing 0.4%. Together, the reports strengthened expectations that the Fed will maintain a restrictive monetary policy stance.
Market positioning remains focused on the possibility of a larger Federal Reserve rate increase at the Dec. 8-9 meeting. Following Tuesday's inflation report, interest rate futures priced in approximately an 88% probability of a 25-basis-point increase and a 12% probability of a 50-basis-point move, leaving an increase effectively fully priced. Federal Reserve Governor Christopher Waller indicated that persistent core inflation could justify a larger adjustment. The benchmark 10-year Treasury yield briefly exceeded 5.00% Tuesday before easing toward 4.98%, while the dollar index remained firm near 102.30. Higher yields and expectations for additional tightening continue to limit gold's recovery. The next important U.S. releases are Thursday's weekly jobless claims and Friday's October producer price index, both scheduled for 8:30 a.m. EST. Softer producer inflation could provide some relief to bullion, while another upside surprise would reinforce December tightening expectations. U.S. Treasury markets are closed Wednesday for Veterans Day, although equity trading continues.
The Strait of Hormuz and U.S.-Iran situation remains unsettled despite recent indications that Washington is reluctant to undertake additional military strikes. Iranian security chief Mohsen Rezaei said Wednesday that Tehran would not permit enriched nuclear material to leave the country and warned of retaliation against any renewed U.S. attacks. He also maintained that formal negotiations with Washington are not underway, although proposals have been communicated through Qatar. Continued attacks on commercial shipping remain a significant concern, with 37 vessels reportedly attacked in October, the highest monthly total since the conflict began. The combination of unresolved nuclear disagreements, maritime security threats and uncertainty over the U.S. blockade continues to support a geopolitical risk premium in crude oil prices. For gold, the conflict provides an underlying defensive-demand argument, although higher energy prices could reinforce inflation expectations and the prospect of further Fed tightening.
Crude oil prices rebounded Wednesday from the previous session's two-month lows as renewed uncertainty surrounding U.S.-Iran diplomacy and Gulf shipping security offset hopes for de-escalation. Brent crude futures advanced approximately 1.4% to $92.77 a barrel in European morning trading, while Nymex WTI gained around 0.9% to $86.80. The recovery followed Tuesday's settlements of $91.49 for Brent and $86.04 for WTI. Oil remains well below its October highs, providing some relief from energy-driven inflation concerns, but continuing disruptions through the Strait of Hormuz leave prices vulnerable to further geopolitical developments.
Global equity markets were mixed to firmer before the U.S. open, recovering from Tuesday's decline as investors assessed the outlook for technology shares and restrictive monetary policy. Japan's Nikkei 225 advanced approximately 1.3%, while China's Shanghai Composite gained around 0.5% and Hong Kong equities weakened. European markets were modestly higher, with the Stoxx 600 gaining approximately 0.3% in morning trading. U.S. stock index futures also indicated a firmer opening, particularly for technology shares. Tuesday's session saw the Dow Jones Industrial Average decline 0.30%, the S&P 500 lose 0.38% and the Nasdaq Composite fall 0.74% as higher Treasury yields pressured equity valuations. Investors remain sensitive to artificial intelligence-related spending, corporate earnings and the possibility of a larger December Fed rate increase.
The key outside markets see Nymex WTI crude oil futures higher near $86.80 a barrel, while Brent crude was trading around $92.77. The benchmark 10-year U.S. Treasury yield was last near 4.98%, following Tuesday's inflation-driven selloff in government bonds. The U.S. dollar index remained firm around 102.30. Higher yields and dollar strength continue to present headwinds for precious metals, although Wednesday's recovery suggests buying interest has returned following Tuesday's liquidation. (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 $4,051.45 to $4,088.51 resistance zone, with a sustained move targeting $4,147.62 and then $4,200.09. Bears' next near-term downside price objective is a break below $4,021.85, with a deeper downside target at $3,991.58. First resistance is seen at $4,051.45 and then at $4,088.51. First support is seen at $4,021.85 and then at $3,991.58.
Spot silver bulls' next upside price objective is to drive prices above the $53.107 to $53.710 resistance zone, with a sustained breakout targeting $54.617 and then $55.360. The next downside price objective for the bears is a break below $52.120, with a deeper downside target at $51.090. First resistance is seen at $53.107 and then at $53.710. Next support is seen at $52.120 and then at $51.090.
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