Destabilizing speculation

How will the new CPI data affect the gold market?

Source: NFIB

To explain, the red rectangles above show how high inflation and labor costs are on the list of “most important issues” for small businesses. In contrast, the percentage of respondents citing poor sales has fallen from 4% in September 2021 to 3% in September 2022, and the current reading is just 1% above its all-time low.

As such, the Fed still has plenty of room to raise the FFR before the US labor market suffers, and one realization is deeply bearish for gold, silver and mining stocks.

The essential

With the “good news is bad news” mantra mauling the bulls, a resilient Main Street is very bearish for Wall Street. Plus, with the S&P 500 and GDXJ ETF selling off at midday on October 11, the anxiety is contagious. So while the CPI release could be a “sell the rumour, buy the news” event, the PM and S&P 500 fundamental issues are far from over.

In conclusion, PMs were mixed on October 11 as gold ended the day in the green. Conversely, the US 10-year real yield ended the day flat, and the USD index delivered a similar performance. However, the Fed’s inflation fight is bullish on both metrics, and they are expected to reach higher highs in the coming months.

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Przemyslaw Radomski, CFA
Founder, Editor-in-Chief
Sunshine Profits: Efficient Investing Through Diligence and Care

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