Gold Up 3.8% In Week – If Closes Above $1,360/oz Will Be Biggest Weekly Gain In Nearly 2 Years

Gold rose as the dollar fell to near a three-year low against a basket of currencies on Friday, heading for its biggest weekly loss in nine months, as a slew of bearish factors including firming inflation and a fall in retail sales and industrial production hit the dollar.

Gold in USD – 10 Years – (GoldCore)

U.S. producer prices accelerated in January, boosted by strong rises in the cost of gasoline and healthcare, offering more evidence that inflation pressures are building. The U.S. producer price index for final demand rose 0.4% last month after being unchanged in December.

In a second U.S. report yesterday, initial claims for state unemployment benefits increased by 7,000 to a seasonally adjusted 230,000 for the week ended February 10. U.S. President Donald Trump’s tax reform may help boost U.S. growth in the short term but could have negative consequences for the U.S. deficit and debt in the medium term, warned International Monetary Fund chief Christine Lagarde yesterday.

Inflation was also surprisingly high in this week’s regional Fed reports, which saw a surge in the Prices Paid index, the clearest indicator of input cost inflation, which in both the Philly and New York reports jumped to 6 year highs.

U.S. industrial production and retail sales were also weaker than expected this week. U.S. retail sales unexpectedly fell sharply in January, recording their biggest drop in nearly a year. Households cut back on purchases of motor vehicles and building materials.

This in conjunction with the high inflation numbers suggests that there is an increasing risk of stagflation taking hold in the U.S.

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