This week could be the most important week of the summer

Two extremely important events will take place this week. The Federal Reserve will call and wrap up the July FOMC meeting. The Open Market Committee will begin on Tuesday and end on Wednesday, July 27 when it issues a statement containing its updated and revised monetary policy. It will be followed by a press conference by President Jerome Powell. With inflation continuing to run extremely hot and inflate to higher levels.

Since June 2021, the CPI has steadily deteriorated. In the past 12 months, there have only been two instances where the CPI index was lower than the previous month, year over year. In August 2021, the CPI was 5.3%, 1/10 percent below the 5.4% recorded in July. In April 2022, the CPI stood at 8.3%, 2/10% below the CPI index of 8.5% recorded in March. For all the remaining months we have seen inflationary pressures increase and we are now at a 41 year high.

The chart above is from the US Bureau of Labor Statistics and plots the year-over-year CPI for each month from May 2021 to June 2022. The chart clearly shows that inflation continues to rise in arrow.

On July 13, the BLS released the consumer price index for June 2022, which revealed that over the past 12 months, the index for all items rose 9.1% before seasonal adjustment. This is the largest 12-month increase since the period ending in November 1981.

The June CPI report will certainly force the Federal Reserve to continue raising rates at this week’s FOMC meeting. It is currently perceived that the Fed will raise rates by 75 basis points. According to the CME’s FedWatch tool, there is a 77.5% chance that the Fed will raise rates by ¾% and a 22.5% chance that it will raise rates by one percentage point.

Second Quarter GDP Report

The second major event is the release of second quarter GDP on Thursday July 28th. This report will give economists a clear indication as to whether or not the economy is headed for a recession. Currently, the assessment is that second quarter GDP should show negative growth. If this assessment is correct, this would be the second consecutive contraction in GDP, which meets the definition of a recession. According to Atlanta Fed GDP Now its latest data suggests a 1.6% decline for the second quarter. Parallel to the Dow Jones, a consensus forecast of economists expects an increase of 0.3%.

Together, these two reports could make this week one of the most important weeks of the summer and shape the short-term economic outlook.

As of 6:04 p.m. EDT, gold futures are trading under pressure today, with the most active August futures contract set at $1717.70. The Dollar also traded slightly lower today with the Dollar Index currently down 0.26% and set at 106.34.

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Wishing you as always good exchanges,

Disclaimer: The opinions expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. This is not a solicitation to trade commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article accept no responsibility for loss and/or damage resulting from the use of this publication.

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