Tuesday, February 14, 2017

Chart of the Day -- Inflation Expectations

Fed Chair Janet Yellen gave a nod to further tightening ahead and the risks of waiting too long in her prepared remarks to the Senate today.

However, she also said the pace of rate hikes should remain gradual. This is confusing a market that was writing off the odds of a rate hike on March 15. And that's why gold tanked after rising earlier in the morning.

There are other issues as well. Inflation expectations are rising. In February, they stand at 2.18%, up from 1.42% in June. 
Also, Peter Bookvar, Chief Market Analyst with The Lindsey Group, gives analysis that shows inflation and earnings are heating up, while unemployment is down.

Bottom line: I still expect the Fed to wait until at least July. I only expect two hikes this year, unless inflation really does start to ramp up. And so far, it is just beating lowered expectations. But this rising fear needs to be priced in to the market.

We'll see. In other gold-related news, global gold ETF inflows surged over 40 metric tons so far in February after a plateau in January. There were large daily builds of around 10.5 metric tons on Feb. 1 and 7

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