CPI day: three ways the inflation print could land for gold

Gold went into Tuesday’s US inflation report a little lower. Spot gold was down 0.6% at $4,114.48 an ounce at 04:30 GMT, Business Recorder reports, carrying a Reuters story, after rising more than 1% on Monday. December futures were 0.2% higher at $4,123.50. Kotak Neo puts Monday’s gain at 1.7% and the previous week’s at 5%.

Kyle Rodda, quoted in the same Reuters report, called the dip “just a bit of churn in the market”, with prices “easing back from the highs reached during the US session, which could be attributed to profit-taking.”

What a December hike means for gold

Traders put an 84% chance on a Federal Reserve rate rise in December, according to CME’s FedWatch tool as cited by Business Recorder. That is up from about 80% on Monday (see Rate hikes, not cuts). Gold pays no interest, so higher rates raise the cost of holding it instead of a bond or a deposit.

The Fed itself is not committing. Richmond Fed President Tom Barkin said on Monday that policy should move “with care” and that he had no base case for the December meeting, Business Recorder reports.

What is expected

The October consumer price index is due at 8:30 a.m. New York time on 10 November, with producer prices on Friday 13 November. FinanceFeeds cites RBC Economics as expecting a 0.3% rise on the month in both headline and core prices, and the Cleveland Fed’s nowcast at 0.24% headline and 0.21% core as of 6 November.

Three ways it could land

These are not forecasts. They set out what each kind of result would test, using what analysts have said and what happened last time.

If CPI is…	What it would test
Hotter than expected	Tim Waterer of KCM Trade told CNBC that hot readings “would likely firm the dollar and lift the odds of a December rate hike.” September’s hot print, released on 14 October, knocked gold below $4,100.
In line	With a hike already priced at 84%, an in-line number adds little new information. The focus would move to Friday’s producer prices and to Fed speakers.
Softer than expected	The hike odds would be the thing to watch. Gold rallied about 5% last week with those odds already high, so a soft print would test whether lower inflation can add to a move that oil started.

Oil is still the other half

Oil fell again on Tuesday, extending Monday’s losses, after President Trump said he would hold off on new strikes against Iran for now, Business Recorder reports. Rodda said that if the US keeps avoiding escalation in the Middle East, lower oil would feed through to the dollar, inflation and rate expectations in a way that helps gold. How that works is in Why cheaper oil is gold’s new best friend.

Those are the views of the analysts and publications named. This site does not forecast the data or the price, and nothing here is advice. The current figure is on the gold price page.

Every figure here is as reported by the publications listed under Sources, at the time they reported it. Prices move; the live gold price has the current one. Nothing on this page is investment advice.