The bullion failed to post any gains following the highest inflation in forty years.
Inflation still rising
Today’s US inflation data were of significant importance. First, the CPI met expectations, printing 7% year-on-year, the highest since June 1982. That was the 19th straight monthly rise in CPI inflation.
At the same time, the core CPI also surged and reachest the highest level since February 1991 (printing hotter than expected at +5.5% yearly).
Shelter inflation rose to 4.13% YoY, up from 3.84%, the highest since February 2007 (the bubble that took down the global economy).
Finally, services inflation jumped to 3.7% – its highest since January 2007 – goods inflation soared 10.7% YoY – its highest since May 1975.
Inflation data practically confirmed that the Fed would hike rates in March. However, volatility was low after the release, with stocks spiking, dollar and yields falling slightly. Still, gold barely moved and remained anchored near 1,820 USD.
Is Fed finally going to step up?
Yesterday, Fed Chair Jerome Powell confirmed the hawkish shift at the central bank with the following statement to the US Senate.
It is worth noting that the Fed’s Chief stated that the Federal Reserve should focus more on elevated prices than on achieving the maximum employment goal. Several months ago, he kept reiterating to everyone that inflation was only transitory. Remember?
What is gold doing?
So far, gold has managed to stay above 1,800 USD, where the 200-day moving average also is. As long as the precious metal trades above that level, the short-term outlook appears bullish.
However, the medium and long-term trends remain neutral as gold has not moved anywhere in more than a year. The resistance should be expected at 1,835 USD; if broken to the upside, we might see a rally toward 1,865 USD. On the downside, a breakdown below 1,800 USD might lead to a decline to 1,780 USD. Rising US yields & strengthening US dollar should cap any upside potential in precious metals.