Gold rises after the highest US inflation reading in four decades

The consumer price index, i.e. CPI inflation, rose by 0,8% in November, after an increase of 0,9%. in October - the American reported Bureau of Labor Statistics. This is the highest inflation reading in the US in almost 40 years.

In November 2021, the consumer inflation index increased by 6,8 percent. compared to November 2020 and was in line with the market consensus. Even though this is the ninth consecutive month in which inflation appears to remain above 2%. target of the Fed and hitting all-time highs since June 1982, the market seems to react as if it were expecting something else entirely. However, more on that in a moment.

The most severe increases in energy and fuel prices

Summarizing the US inflation data, it should be noted that the global increase in commodity prices, rising demand, wage pressure, supply chain disruptions and the low base effect from last year may have contributed to the current rise in inflation. The upward pressure was wide-ranging, with the largest increase in energy costs (33,3% compared to 30% in October), and specifically gasoline (58,1% compared to 49,6%). Inflation also increased in the case of food (6,1% versus 5,3%), new vehicles (11,1% versus 9,8%) and used cars and trucks (31,4% versus 26,4%). %), clothing (5% compared to 4,3%); and medical services (2,1% compared to 1,7%). Inflation seems to have slowed down only in the case of transport services (3,9% compared to 4,5%).

The market was afraid that it could be worse

Looking through the prism of the market reaction to the consensus reading of the data, one can get the impression that investors could expect a much higher publication, e.g. exceeding 7%. Moments after the data, the US dollar seemed to depreciate sharply, and the exchange rate of the main currency pair EUR / USD increased from 1,1270 to 1,1310. In the interest rate market, expectations of interest rate hikes in the US may have withdrawn as well. Gold went up from $ 1773 to $ 1783, and bitcoin from $ 48770 to $ 49950 shortly after release. Thus, apart from the weakness of the USD itself, some investors may have concluded that it may be worthwhile to protect themselves against such high inflation, which may remain in the US for longer.