Gold prices have posted small losses in the Wednesday session. In the North American session, the spot price for an ounce of gold is $1278.34, down 0.14% on the day. On the release front, the focus was on consumer indicators. CPI and Core CPI matched the forecasts, with gains of 0.1% and 0.2%, respectively. Consumer spending reports were a mix – retail sales gained 0.1%, below the estimate of 0.2%. Core Retail Sales came in at 0.2%, beating the forecast of 0.0%. As well, the Empire State Manufacturing Index slowed to 19.4 points, well short of the estimate of 25.3 points. This reading marked a 4-month low.
Gold is showing volatility on Wednesday. The metal pushed to a high of $1289.50, its highest level since October 20. However, the metal has given up these gains in the North American session, after the release of retail sales and CPI. We could continue to see movement from gold, as investors keep a close eye on the tax overhaul bill which is on its way to Congress. If the bill gains steam, we are likely to see the dollar move higher, which could weigh on gold prices.
Although consumer price index numbers remain weak, there was better news from producer price index reports on Wednesday. Core PPI and PPI remained unchanged at 0.4%, beating their estimates. PPI increased at an annualized rate of 2.8%, its fastest gain since February 2012. Inflation levels are being closely monitored by the Federal Reserve, as stronger inflation levels would likely result in a rate hike in early 2018. The markets are very bullish on higher rates, with a December hike priced in at 93% and a January raise priced in at 89%.
The heads of central banks met on Tuesday at an ECB event, with a focus on communication with the markets and the public. Federal Reserve Chair Janet Yellen acknowledged that the FOMC committee of 19 members posed problems, as members did not always speak with a unified voice. This led to the markets picking up on differences between policymakers, often leading to market volatility. Yellen admitted that this problem would not be solved anytime soon, saying it was “a work in progress”.
