Gold surpasses cryptos as cheap inflation hedge

Gold has shifted after the latest round of hot than expected U.S. inflation data and here’s what to watch with the latest surge higher.

There’s a fundamental change of language as solid CPI data previously meant faster tapering schedule, consequently lower gold, the new prevalent language has become: strong CPI = some fear, not an acceptance of inflation = higher gold.

Gold closed above $1,835 an ounce level yesterday, but on Thursday, December Comex gold futures are trading at $1,864.00, up 0.85% on the day after rising $35 this week. The shift in the fundamentals came after the inflation rate in the U.S. accelerated to more than 30-year highs in October.

The price action through key technical inflection points when the CPI beat expectations handsomely – highlights a shift in market’s logic.

This is supported by two other key drivers aside from the hotter-than-expected 6.2% October inflation number.

The first is that Fed’s tapering announcement is now out of the way. And the second is the Fed’s focus on reaching full employment while waiting inflation out.
Fed Chair Jerome Powell put the onus on labor & participation rate, buying time but at the expense of confidence in them waning (risk of a Fed policy error is rising).

This is just the start of the inflation trade for gold, which has been waiting on the sidelines for the past several months.

Also working in gold’s favor is the fact that the yellow metal is quite cheap as an inflation hedge compared to alternative assets such as bitcoin.