US Inflation at Record Level, Gold Shoots up
The markets no longer seem convinced that the current high inflation is as “temporary” as the US Federal Reserve would like it to be. It was announced yesterday that US consumer prices rose 6.2% annualized in October - their highest level since 1990. Gold reacted promptly.
In response to the latest data, the price of gold shot up nearly $ 40, the Comex futures were meanwhile 2% up, while the stock markets fell. In early European trading, an ounce of the metal still costs around $ 1,854.
On a monthly basis, the Consumer Price Index (CPI) was up 0.9%, the largest increase in four months. Even the so-called "core CPI", which does not include the prices for food and energy, increased by 4.6% compared to the previous year, which is the largest increase since August 1991.
As experts noted, more than 80% of the subcomponents of the CPI were above 2%, their highest level since 1991, suggesting broader price increases that are not solely due to the reopening of the economy after the corona crisis.
US Treasury Secretary Janet Yellen tried to calm the markets, saying that high prices would not last. She added that the Fed would be ready to act should the need to prevent inflation like the one in the 1970s arise. Yellen does not expect the high inflation to persist beyond the coming year, as it believes the economy and demand will then return to normal levels.
However, experts do not rule out that inflation could rise to 7% annualized in the short term. Inflation once again clearly exceeded expectations. Both the overriding and core rates are at a 30-year high and show no signs of weakening, so that 7% are possible, it said.
In any case, the October gold inflation data appears to have been the trigger the gold bulls have been waiting for months. The yellow metal was aggressively sought as an inflation hedge and made it above the critical resistance at $ 1,830 an ounce that chart analysts cited. Should gold stay above this level, it could pave the way for USD 1,900 per ounce, it said.
