Inflation, Employment, and FED!
Before starting a new week, let`s review how we ended last week. Last Friday, the U.S. non-seasonally adjusted CPI in November hit a new high since June 1982, at 6.8% in the annual rate. Even if it was in line with market expectations, still needs more attention. Also, CPI on the monthly scale, increased by 0.8% in November, slightly higher than 0.7% of market expectations. The core CPI (excluding energy and food) increased by 0.5% in November, compared to 0.6% in October. According to these data and increasing durable goods prices, expecting to see lower inflation in the short term is a bit unlikely. Anyway, Inflationary pressures may also inhibit economic recovery, as it is already increased the consumers` concerns. While inflation increased by 6.8%, the average earnings increased by 4.2%, which means the real income decreased more than 2%.
On the labor market also we can see improvement signals as the initial jobless claims fell to the lowest level since 1969. Increasing inflation and improvement in the labor market, in line with positive news from the Corona-virus front that shows current vaccines in the market, are effective against the Omicron variant increasing the market risk.
On one side we have to be positive about the economy and it is supporting the stock markets and decreasing the Gold demand, and on the other hand, it means that the economy is improving and does not need extra supports, therefore we can expect a bit more tightening policies from Central banks including FED. This possible Hawkish policy is not in favor of Stock markets, but can help the Gold`s bulls, while at the same time can increase the US Dollar demand and limit again its bullish trend.
Wednesday, the Federal Reserve FOMC will announce the interest rate decisions and monetary policies. Everything in the market depends on how Hawkish will be the FED announcement tone! Therefore, for now, Gold movements will be limited and cautious until we have a clearer view of FED decisions and Outlooks.
From the technical point of view, as you can see in the below figure, the asset price has a range between the 20 and 100 Ma lines in the mid-term chart of H4, respectively at $1,781 and $1,792. With RSI at 55 and an increasing OBV trend line, we can see a more bullish tendency than bearish.
