Gold steady, silver rallies to challenge $90; risk aversion elevated

The data point of the day saw U.S. annual inflation remain at 2.7% in December, steady with November and in line with expectations. The Consumer Price Index (CPI) noted prices eased in the energy sector, driven by lower gas prices, while food prices remain persistently high. On a monthly basis, CPI edged up 0.3%. Core CPI, which excludes food and energy prices, rose 0.2%, below forecasts of 0.3%. On an annual basis, core CPI remained steady at 2.6%, the lowest since March 2021.

CME Group will change the way it sets margins for gold, silver, platinum and palladium futures after a surge in prices and volatile trading. The new approach will set margins based on a percentage of so-called notional, the CME said in a notice. Previously, they were based on a dollar amount. The shift takes effect from Tuesday’s close and follows a “normal review of market volatility to ensure adequate collateral coverage,” the CME said. “The percentage-based method intuitively would be able to capture the margin required, which means no need for frequent adjustment,” said an analyst to Bloomberg. However, if volatility went beyond historical levels, or there are unforeseen circumstances, “they may still increase the percentage,” he said.

Marketplace closely watching growing civil unrest in Iran; at least 648 killed. Iranian protests appeared to persist in localized pockets overnight as an activist group warned of imminent executions by the state and said the civilian death toll from the unrest could be in the thousands, Bloomberg reports. The Oslo-based Iran Human Rights group said at least 648 people had died in the protests, while estimating the toll could be as high as 6,000. The group warned the “risk of mass and extrajudicial executions of protesters is extremely serious.” In one video that’s been verified by the BBC as coming from a mortuary on the outskirts of Tehran, at least 180 bodies can be seen. The US-based Human Rights Activists News Agency reported that more than 10,700 people had been detained in connection with protests by Monday, and put the death toll at 646. German Chancellor Friedrich Merz said Iran's regime is in its "final days" due to mass protests. Merz's comments came as politicians and investors weigh the possibility of the Islamic Republic's collapse and its consequences on geopolitics and energy markets. This situation is helping to drive safe-haven demand for gold and silver.

The key outside markets today see the U.S. dollar index up. Crude oil prices are solidly higher, hit a three-month high, and are trading around $61.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.2%.

Note: The gold market operates through two primary pricing mechanisms. The first is the spot market, which quotes prices for on-the-spot purchase and immediate delivery. The second is the futures market, which sets prices for delivery at a future date. Due to year-end positioning market liquidity, the December gold futures contract is currently the most actively traded on the CME.

Technically, February gold bulls’ next upside price objective is to produce a close above solid resistance at $4,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $4,400.00. First resistance is seen at today’s record high of $4,644.00 and then at $4,675.00. First support is seen at today’s low of $4,582.80 and then at $4,550.00. Wyckoff's Market Rating: 8.5.

March silver futures bulls have regained power and their next upside price objective is closing prices above solid technical resistance at $90.00. The next downside price objective for the bears is closing prices below solid support at $75.00. First resistance is seen at today record high of $89.215 and then at $90.00. Next support is seen at the overnight low of $83.355 and then at $82.00. Wyckoff's Market Rating: 9.5