Gold Prices Hampered amid Inflation Concerns| Influencer‘s Insight •Jasper Lo

Commodity prices and the Commodity Research Bureau (CRB) Index have been surging since the beginning of the year, or even since the middle of last year. Commodities include crude oil, natural gas, soybean, wheat, sugar, cotton, corn, hogs, cattle, copper, aluminum, iron ore, etc., all have risen sharply attributed to the market‘s expectation of economic recovery. In terms of the CRB Index, it has gained nearly 10% year-to-date, while the growth is as large as 77.61% if be calculated on the rebound from last year’s April low of 112.85 to the current 200.44.

With that said, the US inflation prints are getting more and more buoyant. It is no wonder the US expects a rate growth in December with a chance ranging from 6% to 11%, according to the Chicago Mercantile Exchange‘s interest rate futures, which reflect market expectations for the US interest rates. Concerns about the Fed’s rate hike in the next year are emerging in financial markets. But in my opinion, what the interest rate futures reflect is the chance that the Fed exits the market because it will be the first step before raising rates. If the economic indicators continue gathering pace, an era of high inflation could be imminent. On the contrary, negative growth in the data will lead to stagflation. While the former is favorable to the dollar, the latter could hamper it to a high degree.

Based on the analysis of the US recent economic data, I believe the former will come true. Thats why the forex market repeatedly sees a constructive DXY. The US 10-Year Treasury yield coincides with the rising DXY, punishing the gold alone among the commodities. Moreover, the virtual currencies have attracted many capital inflows from the gold market with their extremely bullish momentum, which weighs on gold prices further. Gold prices slipped to $1,760 last Friday before embracing a technical rebound. But gains from the rally are expected to be trimmed continuously amid the above downbeat news. Gold will struggle to find support at the $1,700 psychological level if it breaches below the $1,760 barrier.