US CPI inflation
According to the report released by the U.S. Bureau of Labor Statistics on July 17, the CPI (consumer price index) for all urban consumers rose by 0.30% in June—compared to an 0.40% rise in May. June’s rise is consistent with market expectations.
The YoY (year-over-year) rate rose to 1% from an unchanged reading in May and -0.20% in April. A rise in oil prices helped consumer inflation in the US (SPY). Crude oil prices (USO) rose by 3.40% in June—compared to 10.40% in May.
Core CPI inflation excludes food and energy prices. It rose by 0.20% against a 0.10% rise in May. The monthly gain pushed the YoY rise to 1.80%—compared to 1.70% a month ago.
Impact on gold
Usually, firming inflation is positive for gold since investors view gold as an inflation hedge. However, until inflation rises towards the Fed’s goal of 2%, it could bring the Fed’s rate hike forward. This would be negative for gold and gold stocks like Gold Fields (GFI), AngloGold Ashanti (AU), Newmont Mining (NEM), and Agnico Eagle Mines (AEM). It would also be negative for gold-backed ETFs like the SPDR Gold Trust ETF (GLD) and the VanEck Vectors Gold Miners ETF (GDX).
Goldcorp accounts for 7.60% of GDX—the largest percentage of the fund’s holdings. These ETFs invest in all of the stocks mentioned above.