Gold’s Upside Limited By CPI Gains

November 17th, 2016 by

charting gold priceGold prices are trading in a tight range just above unchanged this morning, holding on in the teeth of better than expected economic news in the US and UK. Spot gold is just above Wednesday’s close of $1,225.00, when it logged a $3.40 loss. December gold futures gave back early gains to finish flat Wednesday, settling at $1,223.90.

Spot silver closed at $16.96 an ounce yesterday, for a loss of 10 cents. It ended near the middle of Wednesday’s trading range. December silver futures settled 11.6 cents lower, at $16.927 an ounce.

dollar-pound-euroThe major influence on precious metals yesterday was the US dollar, which touched a 13-year high against a basket of major currencies before settling up 0.2% at 100.41. The euro continues its fall against the dollar for the ninth day in a row this morning, after touching a 2016 low of $1.0665. The British pound rode a leap in UK retail sales higher today, but lost all gains when the US reported healthy inflation numbers. Worries over tepid to non-existent inflation has been the major stumbling block between the Fed and an interest-rate hike, which will strengthen the dollar.

Consumer prices in the US rose 0.4% in October, after a gain of 0.3% in September. This was the largest one-month gain in six months, fueled for the most part by higher energy prices. Overall, energy prices jumped 3.5% in October, while gasoline prices soared 7% higher. Year-over-year, consumer prices rose 1.6%.

consumer-prices-CPICore consumer prices, which strips out those energy costs as well as food costs, disappointed a bit. Core CPI rose 0.1% in October, the same rate as September, but below economists’ expectations of 0.2% Year-over-year, core inflation rose by 2.1%.

Interestingly enough, wholesale prices remained flat, against expectations of a 0.3% rise.

On the employment front, first-time jobless claims were much lower than expected last week, hitting a 43-year low of 235,000. 19,000 fewer people joined the ranks of the jobless than the previous week. Employment levels is another key metric in the Fed’s rate hike decision. A falling number of newly-unemployed signifies a tightening labor market.

Housing starts in the US for October blew past even the most optimistic of estimates, totaling 1.32 million new residences that began construction last month. Single-family homes saw a 25.5% increase in new construction, while multi-family homes saw an incredible increase of 68.8%. These numbers are the largest one-month increase since 2007.

On Wall St, stocks were trading modestly higher before turning downward. The major three indices closed mixed on Wednesday. The Dow’s rally ended at seven sessions, as it closed 54.92 points lower. Decliners were led by the megabanks Goldman Sachs and JP Morgan Chase, which both fell more than 2% for the day. The S&P 500 also ended with a bank-induced loss, ending the day 3.45 points lower. The Nasdaq bucked yesterday’s trend to close 18.96 points higher.

Banking stocks have been the darlings of the market since Donald Trump won the presidential election, taking to heart his promises to deregulate the financial industry. Some pundits have warned that the run-up in prices had been overdone, and have warned of a correction.

Bonds saw bargain-hunting yesterday, snapping a nasty six-session fall. Wednesday’s report that wholesale prices and falling oil prices muted some of the inflation fears in the Treasuries market.

oil-drilling-white-backgroundA worse than expected jump in US crude oil stockpiles negated OPEC’s attempt to pump up prices with rhetoric yesterday. The Energy Information Administration reported that crude inventories rose by 5.3 million barrels last week. Analysts expected the US oil glut to fall by 2 million barrels.


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