Gold

Today the Bureau of Economic Analysis, a division of the US Department of Commerce reported that the cost-of-living has risen at the fastest pace in just under 31 years vis-à-vis the PCE (Personal Consumption Expenditures Price Index). The costs of goods and services increased by 0.6% in October. That takes the PCE index to 5% year over year.

Both gold and silver prices continue to decline as market sentiment is pricing in the real potential that interest rate normalization will begin as early as next year, and at a much quicker pace than anticipated.

Gold prices fell sharply following an announcement by President Biden to nominate Chairman Jerome Powell to continue to be at the helm of the Federal Reserve for the next four years. This had a cascading effect on multiple markets that resulted in gold prices losing over 2 ½% in value today.

Gold is trading under pressure, which will certainly result in gold closing lower on the week. As of 5 PM EST gold futures basis, the most active December 2021 Comex contract is down $13.80 (0.74%) and fixed at $1847.

Since November 11 gold began to consolidate after completing the current leg of the most recent rally that began on November 4. The rally started one day after the conclusion of the November FOMC meeting. They announced that they would begin to taper their $120 billion asset accumulation later in the month.

Market participants are once again focused upon the real threat that faces global economies, spiraling inflation. Today the United Kingdom reported that inflation has now hit a 10-year high. In the United States, the current level of inflation is at a 31-year high coming in at 6.2%.

Gold futures traded to a high of $1879.50 overseas last night but then fell sharply off of these highs as the U.S. Census Bureau announced the advanced estimate of retail and food services sales for October 2021. Concurrently, the Federal Reserve released its industrial production data for October.

Higher yields in the U.S. Treasury notes were a primary factor taking the U.S. dollar higher, which in turn pressured gold to close lower on the day. This is the first instance in which gold has closed lower in the last eight consecutive trading days.

While gold has traded to a higher high, a higher low, and higher close than yesterday, the key is that it has been consolidating right beneath a critical area of resistance. The price point that I’m speaking about is the 78% Fibonacci retracement that occurs at $1867.50.