Price of Gold Fundamental Daily Forecast – Gold Prices Down Slightly as Yields Rise Following US CPI Surge
Gold futures are edging lower on Wednesday, pressured by firmer Treasury yields and U.S. Dollar ahead of U.S. consumer price data. The much-anticipated U.S. consumer inflation report is forecast to show a 3.6% rise in year-on-year prices. Higher inflation will likely add pressure on the Fed to bring forward rate rises, and weigh on gold, which bears no interest.
At 12:18 GMT, June Comex gold futures are trading $1833.80, down $2.30 or -0.13%.
April’s consumer price index is due out at 12:30 GMT, with it expected to have grown 0.2% on the previous month, representing a 3.6% jump since last year, according to Dow Jones estimates. This jump in the headline CPI would be the largest since September 2011. These numbers compare to March’s 0.6% increase, or gain of 2.6% year over year.
On a c ore basis – which includes food and energy – the CPI is expected to have increased by 0.3% or 2.3% year over year.
For a market already spooked by the specter of inflation, the CPI could take on added importance if it shows a bigger increase than anticipated, particularly in the month over month figures.
Economists have been expecting the April data to show a big year-over-year increase to account for the base effects from last year when prices were weak due to the pandemic and economic shutdown.
The Fed has maintained that the pickup in inflation will be temporary.
“There could be a knee-jerk reaction in the market,” said Mark Zandi, chief economist at Moody’s Analytics. But he said the Fed would take a higher number in stride and the sudden rise should be transitory.
Kevin Cummins, chief U.S. economist at NatWest Markets, said he is expecting headline inflation year-over-year to peak at 3.9% in May before beginning to go back down in June.
The CPI report comes as market expectations for inflation have been rising. According to Bleakley Advisory Group’s Peter Boockvar, the market expectations is that inflation over the next five years will average 2.71%.
“The risks are now to the upside in these inflation stats, as one who believes the risk is not transitory,” said Boockvar, chief investment officer at Bleakley.
Daily Outlook
In breaking news, inflation accelerated at its fastest pace in more than 12 years for April as the U.S. economic recovery kicked into gear and energy prices jumped higher, the Labor Department reported Wednesday.
The Consumer Price Index (CPI), which measures a basket of goods as well as energy and housing costs, rose 4.2% from a year ago, compared to the Dow Jones estimate for a 3.6% increase. The monthly gain was 0.8%, against the expected 0.2%.
Excluding food and energy prices, the core CPI increased 3% from the same period in 2020 and 0.9% on a monthly basis. The respective estimates were 2.3% and 0.3%.
Treasury yields rose after the hotter-than-expected inflation report, driving gold prices lower.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
