Inflation surprise + no Fed policy change = GoldGold has jumped above its exponential moving averages on both the daily and weekly charts after inflation numbers came in red-hot yesterday and today. Despite the hot inflation numbers, Federal Reserve chairman Jay Powell signaled this morning that the Fed will stay the course on easy monetary policy and still expects inflation to be temporary. That means that more inflation surprises could lay ahead, and traders may look to inflation hedges like TIPS, crypto, and gold. All three popped today, with the iShares TIPS bond ETF making a new all-time high.
Gold's got potentially a lot of upside in the horizontal channel here. Note that August tends to be seasonally the strongest month for gold, perhaps because traders rotate to the relative safety of gold as a hedge against the weakest months of the year for stocks (August and September). I also like gold miners right now, with the P/E on GDX at about 17 and the P/FCF at just over 8 making this a relatively inexpensive sector.
I will say as a caveat that this is not a high-conviction trade for me, so I'm not going in very heavy. I've been a little underwhelmed by the intraday price action lately, with lots of strong opens and weak closes. But given the news headlines and the seasonality here, I've decided it's worth taking a position.
