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Gold Hits 4-Week Highs as U.S. Inflation Report Shocks Markets

Commodities Jun 10, 2022 04:46PM ET
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By Barani Krishnan.

Investing.com -- Inflation is everywhere. And gold bulls are lapping it up.

U.S. gold futures hit four-week peaks on Friday as stocks on Wall Street took their worst beating in three weeks after the latest reading on U.S. inflation showed 41-year highs that suggested the Federal Reserve could get more aggressive with rate hikes.

Gold is supposed to be a hedge against inflation and it typically rallies when investors become worried about a reduction in the purchasing power of the dollar. But it’s not a perfect correlation as gold has also broken down various times this year when inflation data came in higher.

Further confounding the hedging theory, gold and the dollar have also rallied together on various occasions this year as inflation concerns propped up bullion prices while the greenback rose on expectations of Fed rate hikes.

That was the situation on Friday.

The US Consumer Price Index grew by 8.6% during the year to May, expanding by its fastest rate since 1981, as the cost of virtually everything — from food to fuel, shelter and clothing — rose again last month, the Labor Department said.

The average pump price of gasoline, particularly, hit more than $5 a gallon on Thursday for the first time ever in the United States, according to data from fuel price tracking service GasBuddy.

Separately, the University of Michigan said its closely-followed US Consumer Sentiment Index hit a record low in its latest survey for June as Americans become increasingly disillusioned with inflation taking a bigger bite of their paychecks each month.

Reacting to the various inflation data, front-month gold futures for August on New York’s Comex rallied to a four-week high just shy of $1,880 an ounce. It eventually settled at $1,875.50, up $22.70, or 1.2% on the day. For the week, the benchmark gold futures contract was also up 1.2%.

The Dollar Index, which pits the greenback against six other major currencies, hit a three-week high of 104.23. U.S. bond yields, led by returns on the 10-year Treasury note hit a one month high of 3.17%.

“The initial shock of a scorching hot inflation report sent gold prices to fresh session lows as traders quickly bumped up Fed rate hike expectations for the September meeting,” said Ed Moya, analyst at online trading platform OANDA. “Then the 5-year and 30-year Treasury yields inverted and growth concerns triggered some safe-haven flows for gold.”

Gold Hits 4-Week Highs as U.S. Inflation Report Shocks Markets
 

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Comments (10)
Just Jeremy
Just Jeremy Jun 13, 2022 9:55AM ET
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I wonder how does it feel to scam people XD called your bull ********on friday
ابوعبدالعزيز الشمر
ابوعبدالعزيز الشمر Jun 12, 2022 2:59PM ET
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dsggry
Jimi Adoplhe
Jimi Adoplhe Jun 11, 2022 10:09AM ET
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jibu
Abhay Agrawal
Abhay Agrawal Jun 11, 2022 6:16AM ET
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Barani sir I think the bounce in gold and silver is a result of short squeeze.after the release of the anticipated CPI data everyone was bearish on gold and silver.so their prepaid Stop losses are hit on the other side of their trade.the bond markets are always right as the bonds sold off spurring the yields to their highs.inflation is not a thing which can be brought down overnight.it takes time and the fed actions of rising rates and reducing its balance sheet will definitely result in controlling price rise because it will discourage speculative demands and control unwanted spendings.the USA citizens have forgotten to save money for their bad times like we Indians do.they are used to easy credit money which gives them power to buy everything whether needed or not.now the fed is tightening for the first time in decades so the results will be fruitful but with a bitter taste.
Mart Bab
Rubberduck1973 Jun 10, 2022 7:09PM ET
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Investors were not hedging against inflation because they keep believing the FED narrative of transitory inflation. It suits their portfolio best. Even after the FED changed its tune, people kept believing in transitory inflation. Now they are forced back into reality. And now we don’t only have inflation to hedge against. We are gradually moving toward deflation. Keep believing in transitory inflation and you’ll be on the wrong side of trade
Amie Inconnue
Amie Inconnue Jun 10, 2022 7:09PM ET
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Moving towards: 1. Inflation; 2. Stagflation; 3. Deflation. I hope I'm wrong and we'll skip number 2.
Just Jeremy
Just Jeremy Jun 10, 2022 4:57PM ET
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pump before the dump
Mart Bab
Rubberduck1973 Jun 10, 2022 4:57PM ET
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You wish. If I were you I would close my shorts. Gold is only going to go up from here on
Nuno Lou
Nuno Lou Jun 10, 2022 4:57PM ET
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Classic pump to dump move
Seshu Ram Namaste
Seshu Ram Namaste Jun 10, 2022 4:57PM ET
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true..true!
Just Jeremy
Just Jeremy Jun 10, 2022 4:57PM ET
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Mart Bab  how is it going for you?
CN KW
CN KW Jun 10, 2022 3:26PM ET
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gold now double dare fed ass! hike the rates 50 np is no longer feasible instead 75 BP hike might be next but share market will collapse! 🤣
Barani Krishnan
Barani Krishnan Jun 10, 2022 3:26PM ET
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Seriously, I'd like to see the commentators here run the Fed. Just try for a month. I'd like to see.
Abhay Agrawal
Abhay Agrawal Jun 10, 2022 3:26PM ET
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the main contributer for inflation are energy and food prices.ukraine war has spooked price rise globally and thus food prices.to cut energy prices levy special margins on energy futures and thus shorts will be forced to close thier positions which I believe is one of the cause of speculative price rise.food futures must be suspended till the war exists.why there is speculative trading in life essential commodities.a person who holds nothing sells it on future trading platform in speculation that when the price falls i will earn profit but it's always the opposite in every case thus resulting in price rise of that commodity. if someone wants to speculate there are many things like bonds,precious metals,base metals but food grains must be excluded from the list
mohd amim
mohd amim Jun 10, 2022 2:15PM ET
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but not gold how funny its is
Lawrenti Berija
Lawrenti Berija Jun 10, 2022 2:00PM ET
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inflation hedge, waiting for this come true feels like wading through molasses. but a deflation hedge it is without a doubt.
Barani Krishnan
Barani Krishnan Jun 10, 2022 2:00PM ET
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I hear you, brother Lawrenti :)
Lawrenti Berija
Lawrenti Berija Jun 10, 2022 2:00PM ET
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Hey Barani. at least todays action goes in the right direction. maybe... No. Who am I trying to kid.... sigh😔
Barani Krishnan
Barani Krishnan Jun 10, 2022 2:00PM ET
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Lawrenti Berija  Hang in there, sir. Logic will prevail ... ultimately.
Ansh Warkde
Ansh Warkde Jun 10, 2022 1:42PM ET
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hii
new age
new age Jun 10, 2022 1:42PM ET
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hello
 
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