Mkt Rundown | INFLATION BACKS OFF, YOUR INCOME BACKS OFF MORE
Gold Stuck in the Middle- RBC
Housekeeping: If you have time, please listen to today’s GoldFix podcast for daily precious metals short term comments as well as for format changes and more content and ways to access that content.
Market Rundown:
Good Morning. Prior to PCE and UMich- the dollar is down 15 bps. Bonds are weaker. Stocks are down 10-50 bps. Gold is down $12 off its lows. Silver is relatively strong up 6 cents ( podcast for why). Energy is strong but fading a little with oil up 75 cents and NG up 7 cents. Grains are bid uniformly. Crypto is crushed somewhat.
PCE comes in slightly softer. Data is disinflationary. Personal income craters
US CORE PCE PRICE INDEX YOY ACTUAL 4.6% (FORECAST 4.7%, PREVIOUS 4.8%
*US Personal Income +0.2% In Jul; Consensus +0.6%
*US Personal Spending +0.1% In Jul; Consensus +0.5%
*Jul PCE Core Price Index +0.1% Rate On Mo; +4.6% On Yr
*Jul PCE Price Index -0.1% Rate On Mo; +6.3% On Yr
Inflation is less, your money is even lesser.
BOTTOM LINE IS INFLATION IS NOT BACKING OFF FASTER THAN YOUR INCOME OR NET WORTH.
Stocks, Gold , and generally anything that benefits from the Fed backing off rate hikes rallies mildly at first. The podcast has more on this.
Zerohedge covers the data reaction here:
The Fed's favorite inflation indicator - PCE Deflator - was expected to slow in July data and it did with the headline dropping from +6.8% YoY to +6.3% YoY
Americans' personal income and spending (on a notional basis) were expected to rise in July and they did but missed expectations dramatically'.
RBC on Gold and Jackson Hole
Tomorrow Fed Chair Jerome Powell will speak, expected by many to underscore resolve to further tighten in order to quell inflation. For gold, the debate around the size and pace of the tightening and the surprise versus expectations remains the key question for it and the main macro factors that drive it. Recently, gold has climbed for three days in a row now, but still remains well off its year to date peak of around $2050/oz.
Regardless, given the directionality of rates, we reiterate that our middle scenario reflects where macro factors would price gold on their own while our high scenario reflects a world where the ongoing risks rise and investors price gold more as a haven. We write neither scenario off as gold remains stuck in an inbetween of sorts, one where rising rates, a strong dollar and key macro relationships weigh on it, while ongoing risks from Russia’s war, China-US relations, and the global economy continue to lend support.
JPM Client Survey: Election calculus
Risk markets moved lower while Bonds sold off aggressively last week,
led by Europe.
Incoming CPI releases continue to support our call for a large but uneven fall in 2H22 inflation
China can be desynchronized both in terms of their business cycle and the earnings cycle, ideally acting as a buffer to headwinds from Europe
We would again highlight US mid-term elections as another positive catalyst for risk assets in Q4
