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Gold Prices Weaken On Higher Inflation Data

Commentaries & Views

(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.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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