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An Unexpected Drop In USA Inflation Effect The Gold Price

An Unexpected Drop In USA Inflation Effect The Gold Price

June 22, 2021 16:16
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The US markets closed strongly at the end of the week’s business. This positive result came in the backdrop of the increase in the confidence and improved market sentiments. The reason for this return of belief in the volatile market is the performance of the US employers who added around three hundred thousand jobs in the industry. The non-farm payroll rose to 287,000 in the United States. The result is better and has shown an increase of 11K than the previous month of May. Even the household employment rose by around 67,000 which is more by 26,000 from the previous month.

However, the average hourly earnings of a US employee increased by only 0.1% on the MoM basis. The market had, however, expected an increase of around 0.2% as it was in the previous month. The US unemployment rate also rose to 4.9% which is quite shocking as so many jobs are being added to the industry. The rate was around 4.7% in the month of May. The market had anticipated the increase in the market to about 4.8%, but further increase came as a shock to them. The average hourly earnings also were not as compelling as expected. It rose by only 2.6% in June whereas it was 2.5% in May. The market analysis had shown a predictable increase to 2.7%.

The US consumer credit, however, showed rise in its results on the LED Finance Ticker and it rose more than it was expected in the month of May. The consumer credit in the United States rose by 18.56 Billion in the month of May where as it was just 13.4 Billion the previous month. The market had expected it to rise 16 Billion which was far less than the actual circumstances.

However, the average weekly hours of all employees remained steady in the month of June at 34.40 in the United States which finally was in tune with the market sentiments. The manufacturing payrolls in the US rose surprisingly in June of about 14,000 which was quite unexpected as it had shown a decline of 3000 the previous month. Prior to that, the decline was 16,000. The underemployment rate also declined in June with a considerable drop of 9.6%. The private payrolls showed a rise by 265,000 in June which is way ahead from the previous month’s 170,000.

Gold had rallied by more than 1% in the month of August, 2015. This came on the backdrop of surprise fall in the US inflation rates. This largely affected the US Federal Reserve’s decision to increase the interest rates in more than a decade. The US consumer price index (CPI) had also fallen in August the previous year. This gave a helping hand to the government in controlling the inflation which in turn complicated the Federal Reserve’s decision to raise rates or not leaving it in a huge dilemma.

This unexpected result gave a free hand to gold to break out and it held ahead to a week’s high at $1124.30 before the meeting of the Fed executives took place. The CPI forum had expectation to tame the yellow metal at around $1,100. Spot gold had risen by 1.3% at $1,119 per ounce. However, the US gold future for December settled to around 1.5% increase at $1,119. This led to an overall increase in the gold stock price which made the dollar lose its sheen a bit which was highlighted on the LED Finance Ticker. In the physical world, India observed a discounted price of $5 per ounce on the account of fall in demands whereas the Chinese market showed an increase of the same amount.

The European markets rose owing to improved market sentiments than the previous week’s slug and almost all the major players ended up in green as shown by the LED stock ticker. The Italian car makers also gained sufficiently. The German, French as well as other markets of the Europe showed increase and is a sigh of relief for the investors who had grown concerned after the Brexit.

The Asian markets are also rallying behind the US favourable results. Japanese stock exchange showed an overall increase of around 2.2%. The Chinese stock market also showed a recovery from previous downfall whereas the Indian stock exchange markets also showed significant increase as shown on the LED stock ticker.


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