Tomorrow at 8:30 a.m. EDT, the BLS (Bureau of Labor Statistics) will release the latest inflation report against the PCE index for September 2022. This will be the most recent data available to the Federal Reserve on the inflation and therefore be a key element in sealing the fate of the size of the next rate hike at the FOMC meeting next week.
According to the CME’s FedWatch tool, there is an 88% chance that the Federal Reserve will raise rates by 75 basis points, down from yesterday’s 92.5% chance prediction. That would take the Fed’s benchmark rate to between 375 and 400 basis points at next week’s Federal Open Market Committee meeting.
According to Bloomberg News, economists surveyed expect the PCE index to post a 6.3% gain in September from a year ago.
“Excluding food and energy, the gauge is expected to have increased by 0.5% from August and 5.2% from September 2021. The high projections follow government figures from earlier this month showing a key measure core consumer prices accelerated in September to 40. high.”
In an article written by Jessica Menton of Bloomberg News, the most crucial question facing investors and traders is “whether inflation, which has been high for decades, is approaching a peak or whether prices will continue to rise…Traders are watching the Federal Reserve’s favorite measure of inflation — the Personal Consumption Expenditures Price Index — because it will help determine whether the central bank is moving higher. forward with another 75 basis point interest rate hike at its meeting next week.While his article focuses on Wall Street and stock market investors, his statements offer specific insight into other classes of assets, including gold and silver.
Thomas Martin, senior portfolio manager at Globalt Investments, said: “The Fed is setting the stage to stop having outsized rate hikes if the inflation data bears this out. But if not, they will be ready to continue with great rides beyond November.
As of 5:20 p.m. EDT based on gold futures, the most active December contract is set at $1667.40 after taking into account today’s net decline of $1.80. However, unlike previous trading days, today’s dollar strength had a negative correlation with gold prices. The Dollar rose 0.79% with the Dollar Index currently pegged at 110.42. This means that gold’s fractional decline would have been much larger had the dollar not gained about 8/10 of a percent of its value.
Spot Gold is currently pegged at $1663.70, which is also a net drop from $1.80 today. Looking closer, the Kitco Gold Index (KGX) reveals that normal trading raised the price of gold by $11.85 and dollar strength took away $13.65, which led to today’s fractional price drop.
Market participants are also considering how the Federal Reserve will take into account today’s government report which showed third quarter GDP rose 2.6% from the estimate of 2, 3%, faster growth than expected. The report reveals that the US economy experienced its first period of positive growth this year. This led to lower gold prices following the release of today’s third quarter GDP report. Gold futures hit a high of $1674.80 today.
Today’s third-quarter GDP report included the most recent data on annualized federal interest payments showing they rose to $736.5 billion. This set a new record for annual interest payments on our national debt.
According to the US Debt Clock.org, our national debt is currently over $31 trillion and unsustainable. Higher interest levels set by the Federal Reserve only exacerbate this problem. However, the current level of national debt and the high cost of servicing interest alone is creating extremely bullish market sentiment for gold.
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Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.
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