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US October CPI Records Highest Print In Over 30 Years

gold us october cpi
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EDITOR'S NOTE: The October Consumer Price Index (CPI) showed the largest increase in over 30 years when the government released the data last week. While this is overwhelmingly bad news for the U.S. economy and the average citizen, there is a silver lining for one type of person: gold investors. Saxo Markets reports that the US October CPI numbers led to “US 10-year real yields, which in the immediate aftermath, dropped to a record low at minus 1.25 percent.” That caused a spike in gold prices which finally “blasted through” a key level of resistance of $1,835. This is a huge moment for gold and may signal that gold prices are set to skyrocket soon. If this is the case and numbers keep coming out that push people toward gold, now could be investors' last chance to get non-Fungible gold and silver at a reasonable price. 

Summary:  Gold blasted through $1835 resistance yesterday after US October CPI recorded the highest print in over 30 years. While the rally was supported by US 10-year real yields, which in the immediate aftermath dropped to a record low, it was the ability to move higher despite seeing the dollar hit a 16 month high that caught some attention. Potentially a sign the market is finally waking up to the fact inflation is a longer-term problem and that gold has some catching up to do relative to current real yield levels.


Gold blasted through $1835 resistance yesterday after US October CPI recorded the highest print in over 30 years. The rally was supported by US 10-year real yields which in the immediate aftermath dropped to a record low at minus 1.25 percent. While the narrative had developed in the wake of the FOMC meeting last week that the Fed would look through high inflation numbers, preferring to focus mostly on the labor market, these numbers were sufficiently hot to jolt the market, raising Fed rate hike expectations for next year.

Gold’s inability to break above $1835 had since July supported a dislocation between rangebound gold and falling real yields. Despite the stronger dollar during this time, it can still be argued that gold has got some catching up to do, with real yields around current levels potentially pointing to a gold price above $1900.

The hot CPI number drove the number of expected 25 basis point rate hikes next year to 2-½ and combined rising long-end bond yields following a disastrous 30-year US Treasury auction, which was sold with the longest tail on record, the dollar jumped across the board. Not least against the euro after the EURUSD broke below the psychological €1.15 level for the first time since July of last year.

Gold’s newfound strength and current ability to weather the strong dollar challenge helped drive gold priced in euros to a one-year high at €1625/oz. 

Silver also caught a bid, especially after managing to break the previous double top at $24.86. For now, the break has not resulted in any outperformance against gold with the gold-silver ratio, currently trading around 74.50 and in need of a break below 74 for that to accelerate.

With the US bond market closed for Veteran’s Day, the market will be focusing on whether gold can build on the break or return to test resistance-turned-support in the mentioned $1833-35 area. Also, ETF holdings will now be in focus to see if the break will trigger renewed interest following months of redemptions. Fund managers have increasingly been reducing their gold exposure during the past year as low stock market volatility and rising equity prices reduced the need for diversification. Whether the white hot October US CPI print will change that remains to be seen during the coming weeks.

Originally posted on Saxo Markets.

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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