Beautiful dawn, light up the shore for me

Most assets have had a relatively uneventful start to the week ahead of today’s US inflation print and tomorrow’s ECB meeting. US treasury yields remain elevated as FOMC member Raphael Bostic claimed the Fed might raise rates only once this year. He did not say this, but June may be the one and done for the year. The closer we get to a US election, the harder it gets for the Fed to be seen to be influencing the economic outlook by adjusting monetary policy.

The gold price remains counterintuitively high. One would have imagined that last week’s jump in yields would have led to a sell-off, but no, people still seem to want the yellow rock.  The price has now risen by almost 15% this year. According to a report in Barrons, the Chinese have been the ones driving the price higher demand for both jewellery and investment. Apparently, the Chinese market has been looking for an alternative to the uncertainty of the property and equity market. Gold has outperformed stocks so far this year. The price of oil and gold can run in tandem at times, and this has been the case so far this year. During periods of geopolitical uncertainty, the oil price rises and speculators look for stores of value and gold fits that bill. Still, record highs for gold with US treasury yields where they are is hard to understand.

The big news today will be the Consumer Price Index print. Estimates are for a 0.3% increase in the headline rate. Anything that deviates from that will further influence the markets’ probability of the June cut. Later in the day, we get the minutes from last month’s Federal Reserve meeting, the tone of that meeting will be the focus. Anyway, for today, stocks seem to be opening in Europe on a slightly more positive note.