Gold Prices Have Opened The Doors To These Levels!

Yellen said the Fed would avoid the 1970s scenario. The market is no longer convinced that inflation can be as temporary as the Federal Reserve allows/thinks. Markets are worried, as US consumer prices rose 6.2% year-on-year in October, the highest figure since 1990. Gold prices went out with high inflation. Details cryptocoin.com‘in.

Relationship between gold prices and inflation

In response to the data, gold rose nearly $40 on the day and December Comex futures were up 2% to $1,867.50 on Wednesday. Stocks fell as risk aversion spread. On a monthly basis, the consumer price index (CPI) rose 0.9% to become the biggest gain in four months. In addition, the core CPI, which takes out food and energy costs, rose 4.6% year-on-year, marking the largest increase since August 1991. Taking a closer look at the price increases, energy, housing and food costs were the main drivers in October. Food is up 5.3% from a year ago – the biggest increase since January 2009. Gasoline prices rose 6.1%, posting the biggest gain since March. Fuel oil saw the biggest increase since 2007, increasing by 12.3% compared to the previous month. Electricity costs rose 1.8%, the biggest monthly increase in seven years.

Cliff Hodge, chief investment officer at Cornerstone Wealth, said: “Under the surface, more than 80% of CPI subcomponents were above 2%, the highest since 1991, indicating broader price increases and not just reopening. is doing. The bond market is telling you that the Fed is way behind the policy curve. Short odds skyrocket, while long odds slowly release. “A flattening curve is not a good sign for risk assets next year,” he said.

Treasury Secretary Janet Yellen on Tuesday tried to calm the markets by stating that high price pressures will not continue. Yellen added that the Fed is ready to take action if necessary to curb 1970s-style inflation. “I would expect price increases to stabilize and we’ll be back to inflation, which is closer to the 2% we accept as normal,” Yellen told National Public Radio’s Marketplace. Yellen stated that she does not see inflation will continue beyond next year as the economy and demand return to normal. Noting that the scenario of the 1970s was not about to be repeated, Yellen said 50 years ago, “people thought policymakers wouldn’t put an end to it, and inflation expectations got embedded in the American spirit… It’s not happening now, and the Federal Reserve won’t let that happen.”

What will the course of inflation be like in the short run?

However, economists do not ignore the increase in inflation to 7% on an annual basis in the short term. James Knightley, chief economist at ING, said: “US inflation again exceeded expectations by a wide margin. Headline and core rates currently at 30-year highs with near-term momentum suggesting 7% is possible. Price pressures are showing little sign of easing and inflation expectations are currently climbing. “It allows us to conclude that the QE contraction will accelerate and rate hikes will come sooner.”

The October inflation data seems to be the trigger that gold has been waiting for for months, and investors are now aggressively looking for it as an inflation hedge. Technically, the precious metal finally broke above the critical resistance level of $1,830, which could open the door to $1,900 an ounce. Strategists at TD Securities said: “Gold prices are pressing along an all-time high multi-month downtrend amid stronger-than-expected inflation data, putting pressure for inflation containment while pricing of central bank hikes remains volatile. “A break above the multi-month downtrend could help reverse the trend of ETF outflows and push gold prices higher.”

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