Gold News

Worst US Inflation in 4 Decades Sees Gold Prices Hit 1-Month Highs, Bitcoin Struggles at 1-Month Lows

GOLD PRICES rose against all major currencies on Tuesday, hitting 1-month Dollar highs at $1970 per ounce after new US data said the cost of living in the world's largest economy has accelerated to the fastest inflation since the recession of 1982.
 
Having hit new multi-year highs ahead of the data however, longer-term interest rates in the bond market edged back on the news, while Western stock markets rallied from an earlier drop, cutting a loss of 1.4% on the EuroStoxx 600 index to 0.2% as New York opened for the day.
 
"We expect March CPI headline inflation to be extraordinarily elevated due to Putin's price hike," said White House press secretary Jen Psaki to reporters last night, blaming the Russian invasion of Ukraine and the ensuing squeeze on global energy and wheat supplies for the cost of living rising at its fastest in 4 decades. 
 
But while the headline consumer price index showed an 8.5% year-on-year rise, inflation excluding fuel and food costs also rose to a new 4-decade high last month, reaching 6.5% on the Bureau of Labor Statistics' first estimate. 
 
Chart of headline US CPI inflation (red) and CPI ex-fuel and food (blue). Source: St.Louis Fed
 
Almost 9-in-10 bets on next month's US Fed decision now expect a 50-basis point rise in overnight interest rates – the first such "hike" since 2000 – according to derivatives exchange the CME's FedWatch tool.
 
That's twice the probability implied by interest rate futures betting this time last month.
 
Ahead of today's US inflation data, global stock markets lost another 1.3% on Monday, with the 4th daily loss in 7 sessions so far in April pulling the MSCI World Index down towards 1-month lows.
 
China and Hong Kong equities then rallied overnight, cutting their losses from this time last year to 15.5% and 25.0% respectively and bucking a wider Asian sell off which left Japan's Topix 1.4% down for the day and 4.6% below mid-April 2021.
 
European stock markets also fell for a 2nd day running, trading 7.9% below this New Year's all-time high on the EuroStoxx 600 index.
 
With gold prices setting 1-month highs on Tuesday, so-called cryptocurrency Bitcoin meantime rallied from 1-month lows beneath $40,000 – a level first reached in January 2021.
 
Down by 1/3rd from mid-April last year, Bitcoin "is more volatile than gold [but] offers better long-term growth prospects and therefore protects against inflation" claims one 'beginner's guide' to the sector.
 
"It may even be considered a better inflation hedge than gold."
 
But here in April 2022, "Rising interest rate fears and the expectation of tighter monetary conditions continue to be a focus for Bitcoin investors," says one crypto platform in an update.
 
"Digital assets have pulled back as we hit peak inflation and rate hike concerns," adds another, apparently a 'prime broker' in crypto according to one blogger.
 
Crude oil prices today rallied back above $100 per barrel of Brent and wheat prices rebounded to trade over 30% higher from the late-February start of Russia's invasion of 'Europe's breadbasket' as Ukraine braced for a renewed assault in its eastern Donbas region.
 
Moscow has now gone into "selective" default on its foreign-held debt according to the S&P ratings agency, because the Putin regime has offered to repay bondholders in Rubles, not in Dollars as contracted.
 
Meantime in the UK, both the Prime Minister and the Chancellor – the country's 2 most senior political officials – have been fined by the Metropolitan Police for breaching the Covid lockdown rules they themselves imposed amid the Number 10 'partygate' scandal, the Conservative Government said today.
 
"Boris Johnson and Rishi Sunak have broken the law and repeatedly lied to the British public," said opposition Labour leader Keir Starmer.
 
"They must both resign. The Conservatives are totally unfit to govern."
 
Sterling was little moved on the news, leaving the gold price in UK Pounds per ounce at 1-month highs near £1510.
 
Euro gold prices were firmer still, rising 1.2% for the week so far towards 5-week highs of €1811 per ounce as analysts and traders looked ahead to Thursday's meeting and policy decision from the European Central Bank.
 

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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