“Technically, trigger point to accelerate to upside is $1794.30. This price level can trigger a rally from $1819.30 to $1822.10.
Yields on US Treasuries strengthen
Gold futures are trading higher on Friday after reversing previous weakness. The dimension behind recovery is fastest-rising inflation news since 1982 in November, putting pressure on economic recovery and raising stakes for the Federal Reserve.
Treasury yields strengthened on this news and US Dollar held steady, suggesting XAUUSD move was a jerk response to a rise in inflation. Gains may be limited as rising consumer prices could move Fed closer to raising rates.
February Gold price on Comex exchange is trading at $1779.90, up $3.20 or +0.18%. On Thursday, SPDR Gold Shares ETF (GLD) closed at $165.87, down $1.03 or -0.62%.
It wouldn’t be entirely surprising if gold rallied today because of high inflation numbers, faster Fed falls and early rate hikes that have been in market for weeks. This can be a “sell rumor, buy truth” situation.
The consumer price index, which measures cost of a broad basket of goods, rose 0.8 percent on month, good at a 6.8 percent year-on-year pace and fastest pace since May. June 1982.
Excluding food and energy prices, core CPI rose 0.5% on month and 4.9% from a year ago, strongest gain since mid-1991.
Dow Jones estimates are for a 6.7% year-over-year gain for headline CPI and 4.9% for core.
US Treasury yields edged up their weekly gains on Friday following hotter-than-expected inflation data.
The yield on benchmark 10-year Treasury note rose 2.1 basis points to 1.508 percent. Yields on 30-year Treasury note rose 1.7 basis points to 1,883%.
With release of strong inflation data, Fed is now tipped to double its asset-buying reductions to $30 billion a month, likely starting in January. That could allow Fed start raising interest rates as soon as next spring.
Gold could spike above $1794.30 as inflation is likely to pick up again in December and Fed is not expected to accelerate pace of taper through January and rate hikes until June.
Profits could be limited if US Treasury yields continue to rise.
Fed Jerome Powell abandons view on “transient” inflation
The biggest economic event for financial markets has traditionally been Jobs Day, but in recent months CPI Day has come into spotlight. That’s because US economy is about to reach full employment, while labor force participation rate has outpaced pandemic era. While a strong recovery is a great sign for economy, it doesn’t mean all is well for average American.
Headline inflation today is forecast to show 6.8% year-on-year growth in November, which would be highest since the summer of 1982 and surpass 6.2% gain seen. in October. The Core Consumer Price Index (Core CPI) is also expected to be as high as 4.9%, prompting Fed Chairman Jerome Powell to recently abandon his view on “transient” inflation. “. Contributing to this increase are unprecedented recovery and stimulus demand, transportation and shortages of both supply and labor.
The deteriorating price environment will likely prompt FOMC officials to accelerate stimulus withdrawal or implement policy tightening more quickly. It also signals a major turnaround for central bank, which has so far been more worried about “maximum employment” aspect of its dual mandate, than it is about “stable prices.”Current market valuation is for Fed to announce its first 25 basis point rate hike in May or June 2022, while high inflation could accelerate uptake of its monthly bond-buying program. $120 billion, possibly ending in March.