Gold and silver close the day down 2.6% and 3.6% after Waller ties a 50 basis point hike to core CPI

Precious metals finished Tuesday near their lows. Kitco's evening report had spot gold near $4,031.80 an ounce, down $107.60 or 2.60%, and spot silver near $51.41, down $1.894 or 3.55%, in late U.S. trading. That is deeper than the roughly 1.8% morning drop in our earlier story: the selling got worse through the day, not better.

The number behind the number: Waller's test

The reason the CPI print mattered more than usual is that Fed Governor Christopher Waller set a bar for it hours earlier. In his Tuesday speech in London, he said he was leaning toward a 25 basis point increase in December. Then he added that if October core CPI looked like the past two months, "with core CPI inflation around 0.3 percent or even higher," a stronger move may be needed, and that a 50 basis point hike "should be considered." Hiking only 25, he said, "would put our credibility at risk."

Core CPI rose 0.3% against the 0.2% economists expected, matching August and September, according to Kitco's reading of the Labor Department report. Headline CPI rose 0.4% against 0.3% expected. The speech set the threshold and the data met it. Waller's words are his own view, not a Committee decision, and he was speaking for himself.

What the market priced

The two outlets sampled at different hours and the odds moved through the day, so treat the 50 bp figure as roughly one in eight. Both agree the quarter-point hike is the base case and the half-point is now live. The Fed held at 3.75% to 4.00% in October, Kitco reported.

Yields did the damage to gold, which pays no interest. Kitco had the two-year yield near 4.725%, up about 18 basis points on the session, and the 10-year up about 12 basis points after briefly topping 5.00%. BullionVault said gold hit a low of $4,033 and noted it was the fourth day in five sessions with swings of nearly $100.

Who it hits

• Jewelers, coin dealers and pawn shops are repricing buy-back quotes again. A $107.60 move on an ounce is about $3.46 per gram of pure gold (107.60 divided by 31.1035).
• Silver users and sellers face the sharper swing. BullionVault noted silver is trading back below $52, near the 11-month low it hit in late October.
• Borrowers with floating-rate lines are the other side of the same trade: a 25 bp hike on a $250,000 line costs about $52 a month more in interest (250,000 x 0.0025 / 12), and a 50 bp hike about $104.

Where things stand this morning

Gold was little changed to slightly higher in early trading. The Chronicle markets board showed spot gold near $4,045 (up 0.33%) and silver near $52.82 (up 2.5%) at 7:17 AM ET, with the dollar index at 102.20 and the 10-year yield at 4.88% on the FRED series. Those are early reads and can reverse. Treasury markets are closed today for Veterans Day, which thins liquidity in rates while equities trade.

What to watch

Thursday brings jobless claims (forecast 195,000 against 189,000 before) and existing home sales; Friday brings the October producer price index at 8:30 AM ET, per Kitco. Kitco also noted that BLS did not publish most October annual inflation rates because of last year's shutdown data gap; BullionVault cited a 3.7% annual figure, so we leave the annual rate out until the BLS table settles it. The next hard date is the Dec. 8-9 FOMC meeting. Live charts: gold and the markets board.

Sources: Kitco News (AI-assisted draft, reviewed by Kitco editors); BullionVault; Federal Reserve Board; Yahoo Finance; Chronicle markets board. Some data may be delayed. This is market information, not investment advice.