⚱️ Where's Gold Going Next and What Is It's Current Catalyst? ⚱️
Updated
Gold rose sharply following the announcement of the US Consumer Price Index (CPI) data yesterday. The headline CPI for September was 0.4 percent, which was higher than the expected 0.3 percent.Month on month (m/m), the Core CPI increased by 0.2 percent.Despite a dismal economic forecast, the Fed's rate rise expectations remain strong.
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See below
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Despite the fact that the FOMC minutes were more fascinating, tapering in November or December is now improbable unless a major event occurs in the interval. As a result, Treasury rates decreased and the US dollar fell in value relative to most other assets, including gold. Higher inflation-adjusted interest-rate predictions are unaffected by slower growth. President Powell has admitted that price increases are more persistent than previously anticipated. Officials at central banks continue to insist that inflation is a fleeting trend. The major cause is interruptions in Covid's supply chain. Gold has been advocated as an inflation hedge despite a lack of proof. In actuality, forecasted inflation has increased since 2013. Note
Gold rose sharply following the announcement of the US Consumer Price Index (CPI) data yesterday. The headline CPI for September was 0.4 percent, which was higher than the expected 0.3 percent.Month on month (m/m), the Core CPI increased by 0.2 percent.Despite a dismal economic forecast, the Fed's rate rise expectations remain strong. Gains of 15.6 percent last week and 10.3 percent in September were impressive in comparison.Despite weaker growth, market expectations of higher interest rates look to be coming true. The price of gold climbed overnight, but bulls remain hesitant to take advantage of additional increases. After falling 3.14 percent in August, the gold-to-dollar exchange rate remained nearly constant in September.The underlying picture remains grim, with central banks looking to raise interest rates in the second half of this year and early next year. Metals do not fare well in high-rate settings. Market indications continue to point to more aggressive central bank increases. In comparison to its September estimate, the IMF reduced its global growth forecast for 2021 by 0.1 percent, from 6.0 to 5.9 percent.Goldman Sachs has reduced its prediction for US growth.
Whether short or long-term, any sort of inflation would be harmful to precious metals. Inflationary pressures would compel central banks to loosen monetary policy, but with the risk of stagflation. In any event, higher Treasury rates and a stronger currency will depress the value of gold. It's tough to make a compelling fundamental case for gold right now. Future gold price variations are expected to be influenced by the Federal Reserve's effect on the US Dollar. Though the FOMC minutes were more fascinating, tapering in November or December is now less plausible unless a major event occurs in the interim. As a result, Treasury rates decreased, and the US dollar lost value in comparison to most other assets, including gold.
Note
According to the CME's FedWatch tool, a 25 basis point hike in June 2022 is 25.1 percent likely.
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