by Peter Schiff, Schiff Gold:
Gold futures soared on the back of yesterday’s December’s Consumer Price Index (CPI) data, climbing by $29.50 (1.10%) to settle at $2,722.60 for the most active February contract. The U.S. Bureau of Labor Statistics revealed that overall inflation rose 0.4% in December—exceeding November’s 0.3% pace and slightly above economists’ consensus of 0.3%. On an annual basis, the rate stood at 2.9% before seasonal adjustments, with core CPI (excluding food and energy) ticking 3.2%—just shy of expectations for 3.3%. This modestly higher-than-projected headline figure, coupled with marginally softer core data and recent optimistic jobs data, has prompted a wave of speculation about the Federal Reserve’s potential policy path.
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Energy costs once again took the spotlight, climbing 2.6% in December and accounting for over 40% of the month’s overall inflation. Gasoline surged 4.4%, adding considerable pressure to household budgets. Food prices advanced 0.3%. While inflation readings remain elevated, some observers, like Peter Schiff, point out these figures signal hotter future inflation.
“It’s ridiculous that Wall Street is spinning this bad report as being good news,” Schiff said on X Wednesday. “Yes, the core rate rose 0.1% less than expectations. But the headline rate rose 0.1% more than expectations. But regardless of expectations, the report shows inflation has bottomed and is going up!”
Source: U.S. Bureau of Labor Statistics. Shaded areas highlight official recession periods.
Related inflation data from Tuesday’s Producer Price Index (PPI) provides additional context for the CPI data. December PPI rose 0.2%, tempered by steady services prices despite higher goods costs. Year-over-year, the final demand index climbed 3.3% in 2024, following a 1.1% rise in 2023. Meanwhile, the U.S. dollar index slipped 0.51% to 109.18, aiding gold’s advance by making it relatively more affordable for foreign buyers. The remainder of gold’s move was driven by direct buying interest, as many investors sought an inflation hedge in the face of continued price pressures.
The incoming Trump administration’s proposed economic measures—ranging from fresh tariffs to additional tax cuts—could stoke further inflation, especially if combined with continued dollar weakness. If this week’s momentum continues, gold could easily surpass its $2800 record price from October over the next few months. As the Fed prepares to meet next on the 28th and 29th of January, the CME FedWatch tool currently estimates a small 2.7% chance of a 25 basis point rate cut, with market participants overwhelmingly expecting the Fed to hold rates steady for at least another month.
