Gold prices rose sharply after the release of the latest US Consumer Price Index (CPI) data. Spot gold was trading at $1,947.03 an ounce before the numbers were published, but has since jumped to $1,961.50 as investors responded to the news.
The dollar index fell 1% to 104.55. The consumer price index for October came in below expectations on a monthly and year-on-year basis. The core readings were also cooler than expected.
This has led to a significant shift in expectations about the Fed’s next move. The probability that the Fed will leave interest rates unchanged at its December meeting is now around 100%, up from around 86% before the data was released.
There is now only a 0.5% chance of a 25 basis point rate cut in December, down from less than 100% previously.
Looking ahead, futures markets are now pricing biased for the first 25 basis point cut in May instead of June .
The Fed is gone. “We are pleased to see that the headline and core CPI are down less than expected. It tells us that the Fed is over. There’s nothing left to do here.”
Lower-than-expected CPI data is positive news for precious metals such as gold. Ghali believes that further weakness in inflation data over the remainder of 2023 could undermine the US dollar.
Looking ahead, Ghali sees the possibility of significant increases in gold prices if these conditions materialize. Prices are expected to reach around $2,100 an ounce within six months .
Gold Markets: Stability after Decline, Opportunity to Rise Soon
Gold markets continue to move around the 38.2% Fibonacci level on Tuesday, as we try to find enough momentum to turn the market and rally. Instead, I think the gold markets are in the midst of stabilizing after a reasonable decline, where we had previously risen directly. After this kind of move, dropping to the 38.2% Fibonacci root level too quickly is also not a big surprise. However, the 50-day EMA is around this area as well, if we can break above that level, gold markets are likely to head higher again, near the $2,000 level.
Below, we have the 200-day moving average, which is just above the 50% Fibonacci level. The 50% Fibonacci level that has reached this level of course is an area that many people will pay great attention to due to the fact that the area is not only a technical indicator that many people pay attention to, but also a technical indicator. The area where we have seen a great deal of noise before.
It is worth paying attention to the Friday candlestick, because if we break above the top of the Friday candlestick, we can really go upwards. There’s a lot of resistance at the top, so I think if we start above that level, we’re likely to rise faster. Keep in mind that gold markets will be closely focused on the US interest rate setting and, of course, geopolitical concerns.
It’s hard to imagine traders being completely comfortable, so I think a certain amount of gold probably belongs to your portfolio from the start. If we make a shift and break below the 50% Fibonacci level, I think that at that point, gold will head towards the $1900 level
The challenges of the US economy: inflation, declining savings, and the role of gold as protection
The US economy is grappling with persistent inflation and a low personal saving rate, drawing criticism from financial experts and driving discussions about effective hedging strategies. Peter Schiff, CEO of Euro Pacific Capital, has been outspoken about the challenges posed by inflation and the government’s role in exacerbating the situation..
Despite the Fed’s commitment to reduce inflation to its 2% target, the policies implemented by the government and the Fed contribute to these difficulties. He expressed doubts about achieving the 2% inflation target set by Jerome Powell, the head of the Federal Reserve, on the first of November. Schiff’s position is that inflation acts as a government-imposed tax that reduces people’s income.
The September CPI showed a year-on-year increase of 3.7%, showing a decline from the June 2022 peak of 9.1%. However, the cost of essentials such as food and shelter continues to weigh on consumers. In this environment, Schiff advocates gold as a strategic investment against inflation. His logic is that gold cannot be created like fiat currency, making it a more stable store of value.
Powell highlighted a strong GDP growth rate of 4.9% in the third quarter, driven largely by consumer spending. However, Schiff disagrees with this perspective, arguing that prosperity should be built on production and savings rather than spending..
Adding to these concerns are data from the Bureau of Economic Analysis that indicated a personal savings rate of just 3.4% in September 2023, a steady decline every month since May. This trend suggests that Americans are finding it increasingly difficult to save money as prices for goods and services rise.
Investors are taking into account these economic signals and thinking about how best to protect their finances against the backdrop of high inflation and low ability to save.
Gold and Bitcoin in the race for best performance as stores of value
Comparing Bitcoin to gold is an argument that is more than a decade old. With supporters and critics on both sides of the aisle, most Bitcoin supporters like Saylor have resorted to allowing data to judge which assets are better.
Over the past weekend, the head of business intelligence and software company MicroStrategy shared a chart comparing the performance of Bitcoin vs. Gold as of August 2020 when the Bitcoin strategy was first adopted.
According to the joint data as shown above, Bitcoin rose by 214% while gold reversed its growth during that period with the valuation declining by 3%. Michael Saylor published the chart to banish naysayers and non-believers who believe that Bitcoin’s MicroStrategy was not the best move.
Bringing the conversation back to the forefront, the Binance CEO said, “Bitcoin is not a good store of value” because it is “very volatile.” This satirical statement is based on the strongest arguments made by Bitcoin’s critics, but the trend has shown that its volatility generally yields better returns compared to gold.
There are changing dynamics in asset viability that can play the role of a store of value and hedge against inflation. While gold has played this role for centuries, leading believers like Michael Saylor are optimistic that Bitcoin is here to take on this role.
From the moment it started buying bitcoin, MicroStrategy maintained its intention that its support for the coin would be long-term in nature. While the company sold its bitcoin holdings only once to support its accounting requirements, it did not sell any of the bitcoins in its bag.
With the last acquisition taking place in the last quarter (third quarter), MicroStrategy now has a total of 158,400 BTC units in its portfolio.
