Inflation Data to Boost Gold?
Inflation Data to Boost Gold?
The US CPI print will be important this week to see whether the Fed really has reached the end of its hiking cycle. The print that the Fed wants to see is the headline continues to fall and, perhaps, even more importantly, the core reading to fall too. A big miss here and watch out for USD weakness, falling US10Y yields, and a big shove higher for silver and gold.
Headline inflation moving in the right direction
Looking at the chart below you can see that headline inflation has been stepping lower in the right direction. Yes, it is still above the Fed’s 2% target, but still moving in the right direction.
Core proving stickier
The core reading excludes the volatile food and energy components. However, the core reading is proving stickier. This is a pattern repeated across many of the major countries.
What to look for
If the headline print comes in below 4.5% and the core below 4.9% then the market will take that as confirmation that the Fed is winning the inflation battle. This could mean a lower USD, lower US10 yields, EURUSD upside, and precious metal upside.
If the headline print comes above 6% and the core above 5.7% then markets will read that as the Fed needs more to fight inflation. This could result in USD upside, higher US10y yields, EURUSD downside, and precious metals downside (although it would not be unreasonable to expect dip buyers in gold and silver).
About: HYCM is the global brand name of HYCM Capital Markets (UK) Limited, HYCM (Europe) Ltd, HYCM Capital Markets (DIFC) Ltd and HYCM Limited, all individual entities under HYCM Capital Markets Group, a global corporation operating in Asia, Europe, and the Middle East.
High-Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.
20230509
