Traders wait for U.S. Consumer Price Index numbers

Tomorrow at 8:30 AM EST, the U.S. Bureau of labor statistics will release its Consumer Price Index summary.

According to Wikipedia, “A consumer price index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households. A CPI is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically.”

Bloomberg today reported that CPI inflation has risen to 5.5% in March. According to the report, “retail inflation rose further in March as fuel and transportation costs increased alongside some categories within the food basket.”

A poll by Bloomberg is forecasting March retail inflation at 5.4%. They also reported that consumer price index inflation stood at 5.52%, which is almost ½ a percent increase from February’s numbers which came in at 5.03%. In January 2021, the CPI data came in at 4.06%. Their pre-release numbers were created by the Ministry of statistics and program implementation today.

According to Aditi Nayar, core inflation computed by ICRA ltd. rose to 6% in March, chief economist at the rating agency.

With inflation moving higher, we have gold futures reacting in a tepid manner selling off today by a total of $12.60 (-0.73%) and is currently fixed at $1732 per ounce. The primary force taking gold lower today was rising yields in the U.S. 10-year Treasury note. Today, the yield moved up to 1.671% in trading today with the 30 year treasury bond moving lower, yielding 2.337%.

As reported by CNBC, “Treasury yields rose slightly on Monday after Federal Reserve Chairman Jerome Powell on Sunday reiterated the central bank’s commitment to maintaining loose monetary policy.”

The Federal Reserve could undoubtedly come under pressure with strong economic forecasts regarding the second quarter of this year. Recent projections indicate that economists are forecasting the second quarter of this year to grow by more than 9%. In addition to strong growth, the March jobs report’s expectations are extremely strong, indicating a hiring surge.

CNBC projects that are unemployed Americans will return to the workforce in large numbers.  Economists polled by Dow Jones expect to see 675,000 jobs added in March as the economy reopened more broadly and the number of vaccinated people increased. The unemployment rate is forecast to fall to 6% from 6.2% in February.”

There is no question that there has been a tremendous uptick in economic growth in the United States. Concurrently we also see inflation beginning to heat up as it has risen month over month since January. If the projections are correct, this could have an extremely bullish undertone for gold. It will have to overcome the recent rising yields of 10 year treasury notes that have put gold under pressure.

Wishing you, as always, good trading and good health,