Gold goes from nursing overnight decline to trading level 
Hotter than expected inflation number sparks quick reversal

(USAGOLD – 6/10/2021) – Gold went from nursing a $10 decline in overnight markets to trading roughly even after consumer prices came in hotter than expected – a 5% gain over last May’s reading and a 13-year high. The yellow metal is level on the day at $1891. Silver is up 9¢ at $27.96. It might take a while for the markets to digest the news. There are two primary schools of thought on where this is all headed. One believes that the Fed will be forced to raise rates and reduce its bond-buying programs, translating to short-term gold negative. The other believes the Fed will keep interest rates below the inflation rate, translating to short-term gold positive. At the moment, indicators are mixed, with yields popping higher and the dollar pushing lower.

UK’s Institutional Asset Managers published a study yesterday indicating strong acquisition interest among pension funds for both base and precious metals. “The findings show that 85 percent of pension funds expect the price of gold to increase over the next 12 months as jewelry consumption rebounds fully in line with the global economic recovery. Two-thirds of pension investors also expect the price of platinum to increase and 60 percent expect the price of silver to increase for the same reason.” The IAM study quotes Hamad Ebrahim, Head of Research at NTree, saying: “Our research highlights the post-pandemic economic recovery is having a positive impact on precious and industrial metal performance. Metals are particularly appealing to pension funds looking to diversify their portfolios and as a hedge against inflation. Furthermore, metals such as palladium, copper and nickel are vital for the transition to a sustainable and greener economy, further increasing their appeal.”

Chart of the Day

Consumer Price Index
(in percent, year over year)

line chart showing spike in consumer prices in 2021

Sources: St. Louis Federal Reserve [FRED], Bureau of Labor Statistics

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