Expectations for US Fed Interest Rate Cut Revive, Precious Metals Futures and Stocks Rise Together, SHFE Silver Gains Over 3% [SMM Newsflash]

SMM January 16 News:

The US core CPI inflation pulled back for the first time in months, sparking market optimism and raising expectations for further interest rate cuts by the US Fed this year. The likelihood of at least a 25-basis-point rate cut at the Fed's June meeting has increased. Precious metals futures and stocks rose across the board. As of 15:05 on January 16, COMEX gold was up 0.46%, quoted at $2,724.6/oz; COMEX silver was up 0.46%, quoted at $31.675/oz; SHFE gold rose 0.83%; SHFE silver rose 3.06%.

Stock Market: The precious metals sector saw gains on January 16. By the close of trading on January 16, the sector was up 1.1%. Among individual stocks, Hunan Gold rose 4.36%, with Hunan Silver, Zhongjin Gold, and Chifeng Gold among the top gainers.

News

On Wednesday local time, data released by the US Department of Labor showed that due to rising energy costs, the overall US CPI for December rose slightly above expectations. However, core CPI data slowed for the first time in months, fueling market optimism. Specifically, the data showed that the unadjusted YoY CPI for December recorded 2.9%, in line with market expectations, up from the previous value of 2.7%, marking the third consecutive month of rebound and reaching a new high since July 2024. The seasonally adjusted MoM CPI for December recorded 0.4%, higher than the expected 0.3%, and up from the previous value of 0.3%. Core CPI, excluding food and energy costs, rose 3.2% YoY, below the market expectation of 3.3%, and had remained at 3.3% since September 2024. The core CPI rose 0.2% MoM in December, in line with market expectations. Thanks to the unexpected pullback in core CPI, interest rate futures traders increased their bets on a Fed rate cut in June, raising the likelihood of a second Fed rate cut in 2025. For the full year, swap traders have revised their expectations for the cumulative rate cut in 2025 to around 38 basis points. In other words, the market is beginning to believe again that the Fed might cut rates twice this year, as suggested by its December dot plot, with the probability now back to around 50%. (Cailian Press)

Since the Start of 2025, Spot Silver Prices Have Risen Over 5%

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Spot Market: On the morning of January 16, the ex-factory reference average price of SMM 1# Silver was 7,819 yuan/kg, up 215 yuan/kg from the previous trading day, an increase of 2.83%. As the Chinese New Year holiday approaches, year-end effects are becoming evident, and market transactions are relatively sparse.

Since the start of 2025, the price center of spot silver has shifted upward. The average price of 7,819 yuan/kg on January 16 represents an increase of 379 yuan/kg (up 5.09%) compared to the average price of 7,440 yuan/kg on December 31, 2024.

Institutional Comments

Peter Cardillo, Chief Market Economist at Spartan Capital Securities, commented that the rise in overall US CPI is disappointing, but this may be due to food prices. The cooling of the core CPI YoY is good news. Regarding the December CPI report, he does not believe it will change the inflation outlook or the Fed's cautious stance.

Tina Adatia, Head of Fixed Income Client Portfolio Management at Goldman Sachs Asset Management, stated that while the latest CPI data may not be enough to prompt the Fed to reconsider a rate cut in January, it still reinforces the notion that the Fed's rate-cutting cycle is not yet over.

Guangda Futures Research Report noted that the US December CPI rose 2.9% YoY, in line with expectations and higher than the previous value of 2.7%, marking the highest level since July last year. However, the core CPI rose 3.2% YoY, below the expected 3.3% and the previous value of 3.3%. Although US inflation has risen, the Fed is more focused on the cooling of core inflation. Market bets on Fed rate cuts have increased as a result. This has influenced trading sentiment in overseas financial markets, with the US dollar index fluctuating slightly but remaining relatively unchanged, while US stocks, crude oil, gold, copper, and other major commodities posted gains. With the new US administration about to take office, market expectations suggest that tariff policies will be gradual due to inflation concerns, leading to a moderation in market sentiment. For gold, on the one hand, it benefits from eased market sentiment, and if the US dollar index falls back from highs, it could provide significant support. On the other hand, caution is advised regarding whether geopolitical easing and a slower pace of Fed rate cuts have been fully priced in. As the Chinese New Year holiday approaches, facing a complex environment, it is advisable to adopt a cautious view, expecting a high-level fluctuation with an upward bias.

Guotai Junan recommends a strategic overweight on gold for the full year. From a medium and long-term perspective, the US faces significant challenges in fiscal reduction, and the credibility of the US dollar may remain in question. Global central banks are still in a phase of allocating gold. Against the macro backdrop of de-globalization and changes in the global order, the frequency of geopolitical conflicts worldwide is expected to remain high, making risk aversion sentiment more likely to rise than fall, which will continue to support gold performance.

CITIC Securities' research report pointed out that based on its gold price analysis framework, it is optimistic about gold prices in 2025. Global central bank gold purchases are expected to continue, with the announcement effect of central bank gold purchases likely to become more pronounced. Global market enthusiasm for gold investment may persist, structurally characterized by "declines in Asia, increases in Europe and the US." Geopolitical conflicts in regions such as the Middle East and Russia-Ukraine are expected to become more unstable in 2025, favoring gold price increases. In the medium term, cryptocurrencies and gold are not yet in competition for safe-haven allocations. According to model predictions, under a neutral assumption, COMEX gold futures prices could exceed $3,100/oz by mid-2025.

JPMorgan predicted in an early 2025 report that gold prices would reach the epic milestone of $3,000/oz this year.