Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? | Metals Mine

  • Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain?

    From sunshineprofits.com

    The combination doesn't feel right. Actually, something stinks - just what is it exactly? Payrolls were strong, while core inflation rose. Nevertheless, the Fed signaled it's going to cut interest rate. Our shiny yellow friend, can you help us make sense of it all? The CPI rose 0.1 percent in June, by the same amount as in May, the government said on Thursday. However, the core CPI, which excludes food and energy prices, jumped 0.3 percent following a previous increase of 0.1 percent. So, the core rate scored the biggest gain in a year and a half, which suggests that the Fed's fears about tame inflation might be ... (full story)

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EventsTrader
Jul 16, 2019 3:12pm
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the Fed became more dovish despite core inflation being still around the target, which is a fundamentally bullish factor for gold.

In the current environment this could be a little misleading. Over the long-term, and as we've already seen, the Fed's pivot to dovish and heading towards easing is very bullish for gold. However, in the short-term there's a very big question mark surrounding market expectations for the July 31st FOMC meeting and how deep the rate cut will be.

The current situation looks like almost 30% of the market is expecting a 50 basis point rate cut. That's tough to believe and if they cut rates by 25 basis points instead, we could see the USD rally, which in turn will send gold lower.

Over the next two weeks I suspect we are going to see a consensus form, most likely around the 25bp rate cut. If that happens, gold could be heading lower in the near term.
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perma-bull
Jul 16, 2019 12:14pm
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very good article
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