LYNXMPED1M0ED L – With its latest $1,900 adventure lasting about 24 hours in all, gold returned Thursday to the directionless waddling that has become its second nature since the start of the year.

Unless the May reading of the U.S. Personal Consumption Expenditure index, scheduled for Friday, springs a surprise, it appears the yellow metal will find little inspiration climbing out of its current $1,800 ‘comfort-zone’.

The PCE is the Federal Reserve’s favored inflation tracker, effectively making it more important than the more ubiquitous CPI, or Consumer Price Index. According to a consensus of analysts watched by, May PCE is expected to have expanded by 2.9% versus a 1.8% growth for April.

“Inflation jitters are making a comeback ahead of tomorrow’s data,” Sophie Griffths, analyst at online trading platform OANDA said. “While inflation fears have stalked the markets across the month, the Fed has been consistent and vocal in reining in expectations of a move to tighten policy.”

Gold for June delivery on New York’s Comex settled the day’s trade down $5.30, or 0.3%, at $1,898.50. On Wednesday, it hit a session high of $1,913.25. That was its loftiest level in 4-½ months since its return on Tuesday to the $1,900 level the first time since Jan. 8.

The Fed acknowledges the price pressures arising from bottlenecks in US supply chains struggling to cope with demand in an economy reopening after months of pandemic-suppression.

But the central bank’s policy-making Federal Open Market Committee, led by Chairman Jerome Powell, insists that these inflationary pressures are “transient” and will fade as the economy makes a full recovery from the pandemic. The FOMC also does not see the immediate need to raise interest rates, held at between zero and 0.25% since the Covid-19 outbreak in March 2020.

All things being equal, a higher inflationary environment is good for gold, which is seen as the best store of value in times of both financial and political trouble.

Yet in recent times, gold’s rivals, the dollar and U.S. bond yields, have rallied instead on signs of ramping inflation, as investors bet the Fed will hike rates faster than anticipated — something the central bank has sworn against. Such speculation triggered massive sell-offs in gold, sending it to near an 11-month bottom of under $1,674, before a retreat in yields and the dollar helped a gradual comeback to $1,800.

The Fed has targeted an annual inflation of 2% over the past decade but it has barely met that goal, with critics attributing the mismatch to the central bank’s dogged following of the PCE — a tame indicator stripped of food and energy costs, the most volatile components of inflation.

On the other hand, the CPI, which includes food and energy components, registered a 4.2% growth in April for its largest increase in almost 13 years after intense cost increases in an economy rapidly recovering from the coronavirus pandemic.

Prices of almost everything, from houses to the lumber that goes into building them, soared in recent months, scaring economists into believing that inflation growth in 2021 could be the highest in 35 years.

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