Opinion with Peter Hug
Gold Prices Weaken On Higher Inflation Data
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Featuring views and opinions written by market professionals, not staff journalists.
(Kitco News) - It appears counter intuitive that gold would sell off with higher inflation data, as the Producer Price Index came in up 0.4% for October. Weakness in gold rests around the perception that with rising rates, the Fed will become more aggressive with its tightening cycle, which will be negative for the commodities. It remains unlikely that the Fed will pursue this course given the risks to the equity market, which is beginning to show signs of cracking, and the lack of fiscal progress in Washington. It appears more likely that the Fed will be behind the curve in a possible inflation surge, which will prove bullish for gold over the medium term. Technically gold remains supported at the $1,265 level. A break here would suggest a short-term test of $1,250. Watch the developments in Venezuela, where a debt default may be imminent, which could spill into the North American equity markets.