The consumer price index (CPI) continues to climb, but gold has been maintaining its resiliency in the face of rising inflation. The precious metal is still up about 5% for the year despite the macroeconomic challenges.
The CPI rose during the month of August, pushing 0.6% higher. This fell in line with Dow Jones survey expectations from economists. In the past 12 months, inflation has risen 3.7%, but despite the increases, gold has been relatively steady. In the same timespan, it is up over 12%.
The precious metal has been mostly sideways for much of the year, but still avoiding a major sell-off. The threat of a looming recession still remains in the backdrop, which may keep demand elevated for the precious metal as a safe haven asset.
A Kitco News article mentioned that while gold was at session lows during Wednesday’s trading session (September 13), prices were “not seeing significant selling pressure even as the Federal Reserve continues to fight an uphill battle against inflation after consumer prices rose more than expected last month.” There was a lot of optimism heading into the start of 2023 that rate hikes would eventually dissipate, but inflation is maintaining its extended stay and could be the case heading into 2024 as the year winds down.
“This latest US CPI data is unlikely to move the needle on the Fed’s highly anticipated move to hold rates steady at their meeting next week – which has already been priced-in by financial markets,” said Nigel Green of deVere Group in a note to clients. “But the uptick in inflation gives the U.S. central bank extra reason to be hawkish moving forward. As such, we also expect the Fed will start to prepare the market for a rate increase at its November meeting.”
2 Options for Gold Exposure
As the markets anticipate another rate hike, investors looking to get exposure can opt for funds from Sprott. To get exposure to gold bullion, consider the Sprott Physical Gold Trust (PHYS), which is a fund that provides an enhanced physical bullion structure, offering the ease of purchase and sale that comes with being traded on an exchange.
An alternate play on gold prices is via ancillary gold services like mining offers opportunities in the Sprott Gold Miners ETF (SGDM). The ETF seeks investment results that correspond generally to the performance of the Solactive Gold Miners Custom Factors Index. This index tracks the performance of larger-sized gold companies on Canadian and major U.S. exchanges.
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