Inflation eases and investors wait for FOMC to conclude tomorrow

Two important events that will shape the economic fabric occurred today. The November CPI was released by the BLS this morning, and the last FOMC meeting of the year began today.

The U.S. Bureau of Labor Statistics released the latest information on inflation vis-à-vis the November Consumer Price Index report. 

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in November on a seasonally adjusted basis, after being unchanged in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.1 percent before seasonal adjustment.”

The report revealed that the cost of shelter continued to rise last month, which offset lower energy costs such as the gasoline index. The cost of energy fell by 2.3% over the month. Food costs came in slightly lower in November, increasing by 0.2% below October’s reading of 0.3%.

The core CPI (all items less food and energy) rose 0.3% in November which is slightly above the core CPI in October which rose by 0.2%.

“The all items index rose 3.1 percent for the 12 months ending November, a smaller increase than the 3.2-percent increase for the 12 months ending October. The all items less food and energy index rose 4.0 percent over the last 12 months, as it did for the 12 months ending October. The energy index decreased 5.4 percent for the 12 months ending November, while the food index increased 2.9 percent over the last year.”

The Federal Reserve meets for the last time this year

The FOMC meeting began and will conclude tomorrow. Federal Reserve officials will decide whether to raise rates or continue its rate hike pause. According to the CME’s FedWatch tool, there is only a 1.6% probability that the Federal Reserve will raise rates by ¼% tomorrow with the overwhelming probability of 98.4% that they will vote to maintain their benchmark interest rate at its current level between 5 ¼ and 5 ½%.

Today’s CPI report combined with last week’s jobs report will be the most recent data used to formulate their decision. At tomorrow’s conclusion, the Federal Reserve will release its statement which will contain its monetary policy decision regarding interest rates and will be followed a half-hour later by a press conference with Chairman Jerome Powell.

Investors will be laser-focused on any information on the most current thinking of the Federal Reserve regarding interest rate cuts and when the Federal Reserve will pivot from its current monetary policy of maintaining elevated interest rates and begin to reduce them.

Gold traders will be specifically focusing on information regarding the Fed’s plan to cut rates as the rate hikes that began in March 2022 had a tremendous detrimental effect on gold pricing, taking gold futures from well above $2000 per ounce to a triple bottom from September through November 2022 resulting in gold’s lowest value last year of $1620.

Today’s news took the dollar lower, but also took gold prices fractionally lower. Although gold was trading marginally higher during the morning session in New York, up between $1 - $2.  As of 4:10 PM EST gold futures basis the most active February 2024 contract is trading $2.60 lower and fixed at $1995. Gold traded to a high today of $2012.50 and a low of $1992.30. 

Any information that is revealed tomorrow in the Fed’s statement or Powell’s press conference most certainly will shape market sentiment regarding gold’s price. If the Fed reveals a rough date in which they will begin to cut rates it could be highly supportive of gold pricing and bring a conclusion to the recent decline of $155 from the highs or nearly a 50% retracement from the October rally which took gold from just above $1820 to just over $2150.

Wishing you as always good trading,