The Daily Market Report: Gold Well Bid as FedSpeak Continues to Focus on Inflation


USAGOLD/Peter A. Grant/03-20-17

Gold remains generally well bid, having built modestly on last week’s solid gains. The yellow metal is pressuring resistance marked by the high from the first week of March at 1236.80. Above that, the highs for the year at 1263.87 would be back in play.

The market is still reacting to what some are referring to as the Fed’s “dovish rate hike” from last week. Nonetheless, the minions were out today trying to rebuild expectations for inflation and at least three rate hikes this year, and possible four.

“I think three is entirely possible, as I gain more confidence in the outlook I could support three total this year. If inflation began to pick up, that would certainly solidify my report. It could be three, it could be two, it could be four if things really pick up.” — Chicago Fed President Charles Evans

Philadelphia Fed President Patrick Harker seems to be expecting hotter inflation as well, as he talked up the prospects for at least three rate hikes this year:

“We are moving in the right direction. There will be a little bit of an overshoot and that’s ok. It’s appropriate.” — Philly Fed President Patrick Harker

Inflation indicators have indeed been edging higher in recent months, but the inflation expectations component of the University of Michigan’s sentiment index tumbled to a record low in March. It seems we’re still getting some mixed readings on price risks . . .

One thing seems certain, if it is going to be inflation, the Fed will remain behind the curve. And if the real rate of inflation remains negative, gold should remain underpinned.

Keep in mind, that whether we ultimately end up with stagflation, or more disinflation is in our futures, gold is the ideal hedge in either case. With gold still below its recent highs, now might be a great opportunity to bolster one’s hedges for the long-haul.

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