Alright, let’s cut through the noise. COMEX gold surged 0.82% to $3254.50/oz and SHAU1 climbed 0.36% to 765.30 yuan/gram today. But hold your horses, folks. This isn’t a runaway rally; it’s a cautious inch-up, fueled by surprisingly soft CPI data.
The April CPI came in at a 2.3% year-on-year – lower than the 2.4% expected and the previous reading of 2.4%. Core CPI also missed expectations, clocking in at 0.2% month-on-month against a 0.3% forecast. This is significant.
Let’s break down why this matters. The Consumer Price Index (CPI) is a key measure of inflation. It tracks the average change over time in the prices paid by urban consumers for a basket of consumer goods and services. It’s a critical indicator for the Federal Reserve.
Now, while a cooling CPI should shift the narrative towards rate cuts, the market isn’t exactly jumping for joy. Currently, CME’s FedWatch tool shows a massive 91.8% probability of no rate change in June, and only 8.2% chance for a 25bp cut.
The longer-term expectations aren’t drastically shifting either. By July, the odds still favor holding rates steady at 61.4%, with only a 35.9% chance of a cumulative 25bp cut, and a meager 2.7% chance for a 50bp reduction.
Adding fuel to the fire, Trump’s continued calls for rate cuts – arguing there’s “no inflation” – are frankly, political theater. Let’s be real, the Fed operates on data, not rhetoric.
On the trade front, we’re hearing whispers of 20-25 potential deals on the table. Positive trade developments could further dampen safe-haven demand, so pay attention.
The bottom line? CPI offered a glimmer of hope for gold bulls, but the market’s cautiously optimistic. The real driver will be the progress (or lack thereof) on trade negotiations and the Fed’s reaction to incoming data. Don’t get caught leaning the wrong way.
