The Fed huffs and puffs but can’t bring down inflation

[View this email in your browser]( [Youtube]( [Kitco Metals]( Editor's Picks [@neils_C]( [After a disappointing February]( the gold market is seeing some new life as prices have held solid support above $1,800 an ounce and now look to end the week above $1,850 an ounce. Gold has regained some impressive technical momentum as it looks to end the week with a 2% gain. The precious metal has ended its five-week losing streak, and prices are back above their 21-day moving average. Adding to the bullish momentum is the fact that these gains have been made despite a significant rise in U.S. bond yields. The yield on U.S. 10-year notes pushed above 4% for the first time since November; at the same time, two-year bond yields continue to hit fresh multi-year highs and are inching closer to 5%. Rising bond yields are helping the U.S. dollar index hold its ground above 104 points. The growing inflation threat is the biggest reason gold has been able to withstand these headwinds. But this is more than just rising consumer prices. There is an increasing fear in the marketplace that the Federal Reserve, despite its hawkish stance, won’t be able to bring inflation down. We can see this growing doubt in break-even spreads, which measure the difference between nominal yields and real-inflation adjusted yields. Specifically, the breakeven on two-year yields has dramatically increased in the past month. “The move from 2% to 3.3% for 2yr breakeven inflation is a remarkable one, and paints a clear picture of a knock to market conviction that inflation can collapse lower in the next couple of quarters,” said economists at ING in a note Friday. [In the coming week, markets will be laser-focused on what Federal Reserve Chair Jerome Powell]( say during his testimony before Congress. He is expected to toe the hawkish line, saying that the Fed will do what it has to get the job done. But will it be enough? [This week Kitco News talked to MarketGauge’s Michele Schneider,]( who said that the rise in sugar prices is just one indication that inflation has become a global problem and is not going away anytime soon. Sugar futures are trading at a multi-year high above 20 cents a pound. This could lead to higher food prices worldwide. Sugar is just one of many commodities that threaten to keep consumer prices elevated. According to Kitco’s Anna Golubova, a report from Bank for International Settlements this week warned that higher commodity prices and a stronger U.S. dollar could lead to global stagflation. There are signs that inflation is becoming entrenched in [Europe after flash core CPI estimates rose to a record 5.6%.]( is the fifth consecutive month that inflation has hit a record level. So interest rates will have to go higher if central banks want to maintain their credibility, but there is also growing chatter that they could raise their inflation target to 3%, which would be a game changer for gold as breakeven rates would go up across the board. Finally, [let's not forget that central banks continue to buy gold with two hands.]( Golubova also reported that central banks bought 31 tonnes of gold in January. For now, we wait and see if gold can get past $1,850 but according to many analysts. It is proving to be a good asset to buy on dips. Have a great weekend. Neils C. Editor's picks [Robert Kiyosaki: The dollar is 'fake,' this is why the American empire is at its 'end']( sugar prices mean that inflation and gold have not peaked yet - MarketGauge's Mish Schneider]( [Gold prices can go lower, but now is the time to build a strategic position - Incrementum' Ronald-Peter Stöferle]( the dip, and hold on for dear life' - Frank Holmes on gold's wild ride]( [Will Elon Musk buy a silver mine? Silver to $125 as EV companies drive demand - Keith Neumeyer]( Elon Musk buy a silver mine? Silver to $125 as EV companies drive demand - Keith Neumeyer]( [It's the perfect storm - Coppernico Metals' Ivan Bebek on the coming commodity crunch]( the perfect storm - Coppernico Metals' Ivan Bebek on the coming commodity crunch]( [Kitco News]( [Gold price sees worst month since mid-2021 on Fed fears]( [Central banks continue to scoop up gold in 2023 as gold price holds the mid-$1,800 level]( [Gold below $1,600 vs. above $2,000: it depends on whether the Fed breaks the economy]( [A third of U.S. adults plan to buy, sell or trade crypto in the next 12 months - survey]( [The gold market is bigger than Fed's rate hikes - MarketVector's Joy Yang]( [Gold's price floor to be tested - Standard Chartered]( [Higher commodity prices and stronger U.S. dollar increase global stagflation risk, warns BIS]( [Gold and silver are tactical plays ahead of data storm, Powell's Senate testimony - Pepperstone]( [U.S. Treasury provides a deep dive into policy considerations for a digital dollar]( [Former Biden adviser says a digital dollar could "crowd out" private cryptos and improve national security]( [Gold Holds Key $1800 Support as Recession Fears Mount]( [CIM 2023]( [The bulls are back as gold prices look to end the week around $1,850, even as bond yields rise]( [Gold Live App]( [Kitco Mining]( [Australia's St Barbara considers placing its gold operations in Nova Scotia into care and maintenance]( [All this gold sector M&A is a 'classic sign' - Cupel Advisory Nicole Adshead-Bell]( [Canada's mining, quarrying and oil and gas extraction sector down 4% in December - StatCan]( [Kitco Gold Chart]( [Kitco Gold Chart]( Technically Speaking Jim Wyckoff Market Analyst and Columnist jwyckoff@kitco.com [Price gains in gold, silver on short covering, friendly outside mkts]( Promotion [Welcome to the world]( This message was intended for {EMAIL} , as a subscriber and/or customer of Kitco. [Advertising]( | [Update Your Email Preferences]( | [Privacy Policy]( | [Contact us]( | [Unsubscribe]( All logos, brand names and/or trademarks that appear here are the property of their respective copyright holders. © 2023 Kitco Metals Inc. 620 Cathcart, Suite #900, Montreal, Quebec, H3B 1M1 Canada.