Gold Price Fundamental Daily Forecast – Hot CPI Reading Could Mean More Pain for Investors

Gold futures are edging higher shortly before the release of the key September U.S. Consumer Price Index (CPI) report. Prices are getting a lift from a dip in Treasury yields and a weaker U.S. Dollar.

Today’s CPI report, due to be released at 12:30 GMT, is expected to offer further clarity on the Federal Reserve’s rate hike trajectory.

Traders are looking for the report to show headline inflation rose a hot 8.1% year-on-year in September. Core inflation is projected to have risen by 6.5% year-on-year in September.

At 10:18 GMT, December Comex gold futures are trading $1682.00, up $4.50 or +0.27%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $156.00, up $0.84 or +0.54%.

Hot Producer Prices Precede Today’s Consumer Inflation Report

Wholesale prices came in hotter than expected. September’s Producer Price Index (PPI) data, which measures wholesale prices of goods, rose 0.4%, according to a Wednesday report from the Bureau of Labor Statistics. Excluding food, energy and trade services, PPI increased 0.3%. Economists surveyed by Dow Jones were expecting headline PII to add 0.2%.

Higher Rates to Stay in Place – Fed Minutes

The Fed’s September meeting minutes were released Wednesday afternoon, showing that central bank officials expect higher rates to stay in place.

“Several participants underlined the need to maintain a restrictive stance for as long as necessary, with a couple of these participants stressing that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation,” the minutes stated.

The minutes may have also signaled that the Fed could slow the pace of its rapid tightening if there was more financial market upheaval.

“Several participants underlined the need to maintain a restrictive stance for as long as necessary, with a couple of these participants stressing that historical experience demonstrated the danger of prematurely ending periods of tight monetary policy designed to bring down inflation,” the minutes stated.

Daily Forecast

If the CPI numbers come in hotter-than-expected, Fed policymakers will be very unlikely to stray from its current course of continuing with its supersized rate hikes and reducing its balance sheet.

Furthermore, a large number will continue to support higher Treasury yields and the U.S. Dollar. This would be detrimental to gold prices.

Demand for gold tends to weaken when yields rise because the precious metal doesn’t pay a dividend or interest. Additionally, a stronger greenback tends to drive down foreign demand for the dollar-denominated asset.