The Consumer Price Index Indicates Growing Inflation

Inflation via the CPI came in above expectations by economists. The numbers showed that the CPI gained +0.6%, which was 10 points above consensus and the highest single month tally since June 2009. When compared to year over year which is considered a more modest inflation metric the CPI is +2.61%.

According to the U.S. Bureau of Labor Statistics, “The gasoline index continued to increase, rising 9.1 percent in March and accounting for nearly half of the seasonally adjusted increase in the all-items index. The natural gas index also rose, contributing to a 5.0-percent increase in the energy index over the month. The food index rose 0.1 percent in March, with the food at home index and the food away from home index both also rising 0.1 percent.”

According to Reuters, “The gasoline index continued to increase, rising 9.1 percent in March and accounting for nearly half of the seasonally adjusted increase in the all-items index. The natural gas index also rose, contributing to a 5.0-percent increase in the energy index over the month. The food index rose 0.1 percent in March, with the food at home index and the food away from home index both also rising 0.1 percent.”

The CPI, along with dollar weakness were both major factors in taking gold and silver futures higher. As of 5:36 PM EST gold futures basis, the most active June 2021 Comex contract is fixed at $1746.20, after factoring in today’s $13.50 (+0.78%) gain. Silver futures basis, the most active May contract gained almost $0.54 (+2.16%) and is currently fixed at $25.405. The dollar lost 0.314 points in trading today and is currently fixed at 91.83. Also, the U.S. 10-year Treasury note was down by 3.9 basis points and currently has a yield of approximately 1.62%, declining after the release of today’s CPI data.

Spot or forex gold, according to the Kitco Gold Index, gained $13.10 in trading today. On closer inspection, dollar weakness accounted for $4.85, with the remaining $8.25 gain directly attributable to traders bidding the precious metal higher. Spot or forex silver is currently fixed at $25.33. Only $0.07 can be attributed to dollar weakness with the remaining $0.47 a direct result of trading activity.

The question with the most recent CPI numbers is whether or not the inflation pressure is temporary or a sign that inflation will continue to rise. Fawad Razaqzada, a market analyst at ThinkMarkets, said, “Inflation will probably pick up further and the numbers for the next few months may appear abnormally large as base effects from the 2020 lockdowns skew the data,”

The Federal Reserve’s revised mandate has indicated that they will let inflation run hot above its former 2% benchmark in lieu of focusing on their mandate of maximum employment. This will undoubtedly continue to have a bullish affect gold and silver.

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Wishing you, as always, good trading and good health,

Gary Wagner