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Gold prices surged sharply higher earlier today, following news of a three-decade high in U.S. inflation. Prices jumped from below $1,830 / £43.47 to current levels, an almost $30 / £0.71 gain. The break above technical resistance levels bodes positive for higher gold prices, but they may have to settle above $1,850 / £43.95 for gold to move higher in the short term. If prices can manage to hold above $1,865 / £44.30 then the next stop could be $1,880 / £44.66.
The U.S. Consumer Price Index report for October, released this morning, was worrisome in that overall inflation spiked back higher, to rates of price increases seen June, and the increases in prices were spread across the segments of consumer consumption. It was not just petroleum-based energy and used automobiles showing higher prices. This reflects the ongoing supply issues at a time when U.S. consumption patterns across goods and services are rising sharply. Higher demand and supply interruptions, which may persist for a while. CPM has stated, when the Fed first used the term ‘transitory inflation,’ that ‘transitory may persist into the first half of 2022. That is the case.
Should inflation continue at such high rates of price increases, then gold will likely continue to increase. This said, at some point, monetary officials might be expected to begin to raise interest rates trying to cap inflationary pressures. Even if the Fed does not push interest rates higher and declaims intentions to do so, financial markets may assume that interest rates will rise and behave according to their collective assumptions rather than measured reality. This is expected to last for the next few months, which may begin to increasingly affect the near-term price for gold.
Notes: Initial Target Prices and Timeframes are just that: Initial. If CPM does not issue a new Recommendation during or after that time it indicates that CPM maintains the posture in the most recent Trade Recommendation. Discretion should be allowed at +/- 0.20% of the price at the time each TR is issued from the target. Recommendations are valid until the target date or a new Trade Recommendation or message is issued by CPM. CPM’s preferred investment strategies use physical, futures, forwards, and options. US$/GBP exchange rate used: 0.74