Does Gold Like Acronyms? The Golden Story Of SPX, CPI, And IMF
Sunshine Profits | Oct 16, 2018 07:17AM ET
SPX continued losses. CPI slowed down. IMF cut its projection of global growth. What does it all imply for the gold market?h2 Stock Market Turmoil Continues/h2
Let’s start from the US stock market. In the last edition of the safe havens , such as gold. The yellow metal jumped above $1,220 on Thursday, as one can see in the chart below.
Chart 1: Gold prices from October 10 to October 12, 2018.
In our CPI rose 0.1 percent in September, following an increase of 0.2 percent in August. The core CPI also moved up 0.1 percent, the same change as in the previous month. Over the last 12 months, the consumer prices jumped 2.3 percent, compared to 2.7 percent increase in August. The slowdown was mainly caused by a notably smaller increase in energy prices. The index for all items less food and energy climbed 2.2 percent, the same as last month, as the next chart shows.
Chart 2: CPI (green line, annual change in %) and core CPI (red line, annual change in %) over the last five years.
Hence, the inflationary pressure eased somewhat in September. However, inflation is still slightly above the Fed’s target. So we don’t expect any changes in the Fed’s policy of gradual hiking the Global Financial Stability Report , also written by the IMF, finds that “global near-term risks to financial stability have increased somewhat, reflecting mounting pressures in emerging market economies and escalating trade tensions.”
However, the global economic expansion continues and most of the risks mentioned by the IMF concern the emerging countries which are sensitive to a strong greenback and rising dollar-denominated rates. The bottom line is thus that some caution is warranted, but it isn’t quite time to panic.
Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
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