Can US CPI rescue the Gold?

Can US CPI rescue the Gold?
Analysis
Ahura Chalki
Author:
Ahura Chalki
Published on: 14.09.2021 06:39 (UTC)
Post reading time: 1.84 min
130

What is Gold reaction to CPI numbers? 


Today we will have US inflation numbers, which can tell us more about how FED should move in its next meeting on 21-22 September. 


Last week we had US Producer Price Index (Inflation) that confirmed our concerns with an 8.3% increase in August. Later today we will have the US Consumer Price Index, which is expected to show annual inflation at 5% or even more, which can be the fourth consecutive month above 5%. These expected numbers will confirm the persistent disruptions in the Demand and Supply chain and market difficulties to fix it. As long as we can not solve this problem, we have to wait for higher inflation numbers. 


The gold market is waiting for today`s inflation numbers and to have a clear idea of what FED is supposed to do. If consumer prices rise much more than expected, expectations for when the Fed could start tapering bond purchases will be earlier in November, instead of December it even January 2022. Before knowing the answer to this question, oscillation will be at the current range. 


And how is Gold supposed to react to the Inflation numbers? 

While higher inflation means earlier tapering, it will push the US Dollar and Bond yields to a higher level. At the same time, Stock markets will ease from their current high level, but will not be something like a crash. Since we have a stronger US Dollar, it will push the gold to the lower levels in the beginning, but a bit later, since cash flow out of Stocks looking for somewhere to go, Gold can attract part of this wandering liquidity that looking for Home or even to hedge their positions in the stock markets. 


On the flip side, if numbers could not increase the market concern and let the FED continue its current ultra-dovish policies, the US dollar will ease and Gold can increase, same as Stock markets, however, a bit later, since stocks will be doing well, bulls will be limited because stocks can give better profits. 


And finally, with any positive or negative news, still gold not an uptrend, neither in a downtrend will not have enough encouragement to increase or fall sharply. 


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