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Short-term Gold Bear Says CPI Data Could Change His Tune

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(Kitco News) - Gold bulls are eying inflation and are looking for data to exceed expectations, catching the Federal Reserve on the back foot and potentially pushing gold prices higher.

But one analyst says the gold market may be getting ahead of itself.

“Our economy showed it is okay after GDP was reported up 2.6% for Q2. Some economists are looking for 3.5% for Q3, and I also expect an uptick in economic growth in the second half of the year and through 2018,” noted Markos Kaminis, founder of the Wall Street Greek blog, in a recent post.

“That is a big part of the reason why I'm currently bearish gold for the short-term (bullish for long-term portfolios).”

Gold prices were supported by continued tensions between North Korea and lower equity prices Thursday. December Comex gold futures last traded at $1,291.10 an ounce, up 0.92% on the day.

However, the former equity analyst for Standard & Poor’s said he expects gold’s safe-haven rally to be short lived.

“I do not believe the latest North Korea scare will develop into anything substantial, and that recent gold gains on the issue will be shed before long,” he wrote.

“If the economy grows at a robust rate, corporate earnings will as well; and stocks will draw capital away from safe havens. Also, if inflation grows at a moderate rate toward the Fed target, then Fed monetary policy tightening will speed in rate and in trajectory, serving the U.S. dollar and working against gold.”

That said, Kaminis reiterated that he is closely watching the Consumer Price Index data due for release later in the week to determine gold’s next move. Economists are expecting CPI to increase by 0.2% in July.

“If inflation spikes significantly ahead of expectations, say on burgeoning labor market pressures, then investors would likely bid up precious metals prices. The Fed will have been perceived as behind the eight ball or late to the game in that scenario. This is what gold bulls are looking for on the radar.”

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 precious metal products, 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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