Hawaii Six O - Gary Wagner
PCE reveals inflation continues to decline moving stocks higher and gold lower
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Gold reacts to the release of the PCE inflation index with a $10 decline. As of 4:25 PM EST gold futures basis the most active June contract is currently off by 0.41% ($10.70) and fixed at $1986.90. Silver continues to differentiate itself from daily moves in gold moving higher today in unison with a stronger US equities market. The most active May 2023 futures contract is currently up 21.6 cents or 0.90% and fixed at $24.205.
The dollar is currently trading higher by 0.48% and the dollar index is fixed at 102.305. That being said, the dollar has had a strong decline this month declining by approximately 2.65%. We anticipate that the dollar index could break below 100.
Monthly gold & silver range; both have big moves and strong monthly gains
Today marks the last trading day of the month resulting in the largest monthly gain since November 2022. Gold futures traded to a low of $1813 and a high of $2015 this month over a $200 price range. Gold futures opened at $1835 and is currently fixed at $1987, resulting in a net gain of $152 in March.
Silver futures traded to a monthly low just below $20 and a high of $24.31 (which occurred today). Silver opened at $21.07 and is currently trading just off the high at $24.20 gaining $3.13 this month.
It must be noted that both gold and silver had a change in the most active contract which resulted in some of the gains seen in both precious metals when viewed with a continuous chart (from which these numbers were gleaned). Gold futures most actively traded month went from the April to the June contract. Silver futures most actively traded month went from March to May.
PCE inflation index declines
Today the Commerce Department released the most recent data for inflation revealing a decline in both the YoY and MoM inflationary pressures. Economic forecasts anticipated that inflation would remain steady at 5.3% in February. The PCE inflation index came in at 5.0% YoY after factoring in an MoM increase of 0.3%. This is half the MoM increase from the prior month which came in at 0.6%. The report revealed that food prices increase by 0.2% during the month and energy declined by 0.4%.
The core PCE price index increased by 0.3% in February which is a decline from 0.6% in January coming in at 4.6% YoY a fractional decline from January which came in at 4.7% YoY. Although today’s report indicated that inflation continues to decline some components remain persistent and inflation remains elevated. Most troublesome is the rate of inflation for services which remains elevated
The CME’s FedWatch tool indicates that professional traders continue to be roughly split between anticipating a ¼% rate hike or a pause in interest rate hikes at the next FOMC meeting. According to the CME’s probability indicator, there is now a 52.2 % (down from 52.9% yesterday) probability that the Federal Reserve will pause its hawkish monetary policy of raising rates at the next FOMC meeting, and a 56.4% probability (down from 52.9% yesterday) that the Fed will raise rates by ¼%.
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Wishing you as always good trading,
Gary S. Wagner