US CPI inflation

According to the report released by the US Bureau of Labor Statistics on June 18, the Consumer Price Index (or CPI) for all urban consumers rose by 0.4% in May, compared to a 0.1% rise in April. On a YoY (year-over-year) basis, the headline CPI remained steady in May.

An increase in oil prices helped consumer inflation in the United States (SPY). Crude oil prices (USO) rose by 10.4% in May. Food prices remained unchanged in May for a second straight month.

US Consumer Price Inflation Rises 0.4% in May

Core CPI

Core CPI inflation, which excludes food and energy prices, rose by 0.1% in May over the previous month and by 1.7% over the same month last year. The core CPI was lower compared to April’s figures on a month-over-month basis and on a YoY basis.

Inflation firming

The annualized rate of CPI increases over the last three months is close to 3%, which signals firming US inflation. A stabilization and increase in the price of gasoline could push inflation higher over the coming months.

Inflation and gold

On the one hand, firming up of inflation is positive for gold, since investors view gold as an inflation hedge. On the other hand, as inflation inches up, it could bring the Fed rate hike forward, which will be negative for gold and gold stocks such as Gold Fields (GFI), AngloGold Ashanti (AU), Newmont Mining (NEM), and Agnico Eagle Mines (AEM). It would also be negative for gold-backed ETFs such as the SPDR Gold Trust ETF (GLD) and the VanEck Vectors Gold Miners ETF (GDX).

Goldcorp makes up 7.6% of GDX, the largest percentage of the fund’s holdings. These ETFs invest in all the stocks mentioned above.

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