Gold Climbs Toward a Record as Producer Prices Drop Unexpectedly
This article from Bloomberg may be of interest. Here is a section:
“While the strong labour market trends and sticky core services inflation suggest a 25bp hike at the May FOMC, markets are increasingly looking toward the end of the hiking cycle, with cut timing also top of mind,” said Ryan McKay, a commodity strategist at TD Securities.
Core CPI ex-Shelter peaked in September and continues to trend lower; albeit at a slower pace than it advanced. That suggests there is still some way to go in putting the inflation genie back in the lamp. It might seem presumptuous at present but deflationary pressures will eventually prevail because of the long and variable lags from rising rates, negative money supply and quantitative tightening.
That’s one of the reasons gold is pushing out to new highs. The potential is growth will moderate faster than inflation and that will force the Fed to ease up. It suggests a higher inflation rate will be tolerated for longer because the alternative would be both deep deflation and high unemployment.