While both the FOMC statement and press conference by Chairman Powell informs market participants as to their updated and revised monetary policy, It is the release of the minutes that give investors much more clarity and insight. As they say, the devil is in the details.

Individuals worldwide that are 40 years old or younger have never experienced the inflationary pressures that currently exist.

Why Is Inflation Rising?

Gold opened Monday morning in Australia with a lackluster move that took prices lower. Basis, the most active June 2022 contract gold futures, opened this morning at $1927.10 and traded to a low today of $1918.20.

The Bureau of Labor Statistics released some welcomed news today. 431,000 Americans became gainfully employed in March, and the jobless rate was within 0.1% of 3.5%, coming in at 3.6%. Economists polled had forecasted that over 500,000 jobs would be added. However, that has little relevance with today’s report indicating that the labor market in the United States is vibrant and strong.

To say that the last two years contained extreme hardship beginning with the pandemic that led to a recession and massive expenditures by governments and central banks would be an understatement. The pandemic created one of the deepest recessions in history. This led to governments and central banks allocating enormous amounts of capital to reignite the economies that had been devastated.

Gold pricing recovered today after trading to a low yesterday of approximately $1886.90. That price point corresponds to a critical Fibonacci retracement level of 61.8%.

Inflationary rates have been rising dramatically over the last year. We have seen both the CPI and PCE inflation index increasing each month since October last year. The latest number to be released by the government was the CPI index for February which came in at a 40 year high of 7.9%. This is the highest level in 40 years since January 1982.

Ever since gold hit a high of $2078 on March 3 traders and investors, viewing the market as overbought reacted by selling the precious yellow metal taking it lower. By Wednesday, March 16 gold futures traded to a low of $1896 before moving up slightly and consolidating between $1946 on the high side and $1910 on the low side.

This question is extremely applicable to the current conflict because it will exponentially magnify the record high level of inflation which began years ago as the Federal Reserve and central banks embarked on one of the most accommodative monetary policies ever.

Inflation is currently running at 7.9% and new forces emerging over the last month will exponentially magnify the pace at which inflation continues to grow. It could challenge the highest level we have seen in since 1979. If this unfolds, we would see gold move exponentially higher.