2024 Inflation Deceleration Projection - Long Gold
My views of Inflation:
In essence, the inverse correlation between gold and real rates persists, I anticipate a transition from QT to QE by the Fed come May, and subsequent rate adjustments in 2024, propelling Gold towards my $2300-$2400 target. My projection is underpinned by my forecast in the deceleration of inflation, evidenced by the significant retracement in Core CPI and Core PCE post hikes witnessed '21/'22. I anticipate a cessation QT activities by the Fed, given the satisfactory contraction in inflationary pressures, albeit with a cautious eye on the potential persistence or escalation of inflationary trends in the forthcoming periods. The question begs, will inflation be aligning with the Fed's 2% target? Yes, I believe it is, and this bolsters the thesis favoring Golds appreciation.
Currently, Core CPI and Core PCE trends underscore a significant retreat from the '21/'22 peaks, courtesy of the Fed's QT regimen. As I (and markets) anticipate May cuts, I infer the Fed's QT was adequate in curbing inflation. The latency in real rate adjustments post-Fed hikes may even suggest the Fed may have even overdone QT. The forthcoming period is critical for assessing persistent versus transitory inflation dynamics, again, with an overarching trajectory into inflation's trend towards Powell's 2% target. I believe this leans towards this alignment, underpinned by mostly structural inflation rather than cyclical, structurally; attributed to post-Covid supply chain recalibrations. Although I believe cyclical inflation occurred, I believe the Fed's QT was more than enough to put the foot down. This is because the structural inflation mitigation underscored the inefficacy of cyclical monetary policies in addressing non-cyclical inflation. Though I cannot stress this enough, I still believe cyclical inflation occurred and it is a problem to present itself come '24.
It seems Powell is quite tipsy, as he does not want to mess things up, after seeing headline CPI data in early January '24 on the 11th come out, Powell thinks he may have jumped the gun on his dovish FOMC meetings prior to the data.
We're observing an inflation slowdown, edging towards the Fed's 2% target, with a keen eye on inflation-growth dynamics and the Fed's uncertain stance influencing inflation's trajectory. The onset of a rate-cutting cycle sees downside-skewed inflation, with the main ambiguity revolving around the extent of cuts. Post headline January '24 CPI led Powell to believe he jumped the gun to his prior dovish FOMC meeting in December '23, amid core CPI and PCE indicating steady deceleration, validating Fed's inflation target alignment. Energy's influence on headline figures contrasts with core deceleration, hinting at possible hawkish Fed shifts if core inflation is affected. The divergence between rate cuts, growth, and energy prices underscores a sort of balance, with the consensus leaning away from further hikes, closely monitoring labor and inflation trends into '24. Despite recession forecasts, '22/'23's robust labor market debunked such predictions, underscoring overlooked nominal income growth's support.
Forecasting a recession in '22/'23 hinged on real income growth, bolstered by employment, easing structural inflation, and lower energy prices. Despite housing and consumer spending recovery, some argued ISM's YoY contraction, however the ISM is not meant to be seen as a YoY indicator. It's a diffusion index that reflects the breadth/growth of contraction compared to the previous month. The ISM is based on a survey on whether conditions for manufacturing business are improving or deteriorating compared to the previous month, clearly measuring that on a YoY basis makes no sense as this is a snapshot of the manufacturing sector’s current momentum, rather than a comparison to the same month in the previous year, which would be a YoY analysis. Thus, this didn't signal a recession. My early expectations of early Fed cuts are rooted in structural inflation resolution from supply chain improvements.
I believe to discern the Fed's rate cut strategy, we need to understand the spread between the Fed funds rate and core inflation metrics (CPI and PCE). The disparity will signify the Fed's probable target spread, with the Fed funds rate presently surpassing core inflation. A resilient economic growth, as indicated by the Bloomberg Economic Growth Surprise Index, might lead the Fed to maintain a wider spread, hinting at 3-4 rate cuts. Conversely, a growth deceleration could validate a more aggressive 5-6 cuts. The sentiment indices from the Fed's communications suggest a preference for a narrower spread. I think Powell doesn't want to jump the gun on cuts, as I believe it would be humiliating for him to cut in May and hike in March due to a reacceleration in core inflation figures.
With inflation trending towards the Fed's 2% goal, my analysis suggests potential rate cuts in 2024, alongside an Gold reaching my target $2300-$2400.
The content provided here is for informational purposes only and should not be construed as investment advice, a solicitation, or recommendation to buy or sell any securities. It is not intended for qualified investors only. Users should conduct their own research or consult with a financial advisor before making investment decisions. The author does not guarantee the accuracy or completeness of the information and will not be held liable for any errors, omissions, or inaccuracies. Use this information at your own risk.
Disclaimer: The content provided here is for informational purposes only and should not be construed as investment advice, a solicitation, or recommendation to buy or sell any securities. It is not intended for qualified investors only. Users should conduct their own research or consult with a financial advisor before making investment decisions. The author does not guarantee the accuracy or completeness of the information and will not be held liable for any errors, omissions, or inaccuracies. Use this information at your own risk.
In essence, the inverse correlation between gold and real rates persists, I anticipate a transition from QT to QE by the Fed come May, and subsequent rate adjustments in 2024, propelling Gold towards my $2300-$2400 target. My projection is underpinned by my forecast in the deceleration of inflation, evidenced by the significant retracement in Core CPI and Core PCE post hikes witnessed '21/'22. I anticipate a cessation QT activities by the Fed, given the satisfactory contraction in inflationary pressures, albeit with a cautious eye on the potential persistence or escalation of inflationary trends in the forthcoming periods. The question begs, will inflation be aligning with the Fed's 2% target? Yes, I believe it is, and this bolsters the thesis favoring Golds appreciation.
Currently, Core CPI and Core PCE trends underscore a significant retreat from the '21/'22 peaks, courtesy of the Fed's QT regimen. As I (and markets) anticipate May cuts, I infer the Fed's QT was adequate in curbing inflation. The latency in real rate adjustments post-Fed hikes may even suggest the Fed may have even overdone QT. The forthcoming period is critical for assessing persistent versus transitory inflation dynamics, again, with an overarching trajectory into inflation's trend towards Powell's 2% target. I believe this leans towards this alignment, underpinned by mostly structural inflation rather than cyclical, structurally; attributed to post-Covid supply chain recalibrations. Although I believe cyclical inflation occurred, I believe the Fed's QT was more than enough to put the foot down. This is because the structural inflation mitigation underscored the inefficacy of cyclical monetary policies in addressing non-cyclical inflation. Though I cannot stress this enough, I still believe cyclical inflation occurred and it is a problem to present itself come '24.
It seems Powell is quite tipsy, as he does not want to mess things up, after seeing headline CPI data in early January '24 on the 11th come out, Powell thinks he may have jumped the gun on his dovish FOMC meetings prior to the data.
We're observing an inflation slowdown, edging towards the Fed's 2% target, with a keen eye on inflation-growth dynamics and the Fed's uncertain stance influencing inflation's trajectory. The onset of a rate-cutting cycle sees downside-skewed inflation, with the main ambiguity revolving around the extent of cuts. Post headline January '24 CPI led Powell to believe he jumped the gun to his prior dovish FOMC meeting in December '23, amid core CPI and PCE indicating steady deceleration, validating Fed's inflation target alignment. Energy's influence on headline figures contrasts with core deceleration, hinting at possible hawkish Fed shifts if core inflation is affected. The divergence between rate cuts, growth, and energy prices underscores a sort of balance, with the consensus leaning away from further hikes, closely monitoring labor and inflation trends into '24. Despite recession forecasts, '22/'23's robust labor market debunked such predictions, underscoring overlooked nominal income growth's support.
Forecasting a recession in '22/'23 hinged on real income growth, bolstered by employment, easing structural inflation, and lower energy prices. Despite housing and consumer spending recovery, some argued ISM's YoY contraction, however the ISM is not meant to be seen as a YoY indicator. It's a diffusion index that reflects the breadth/growth of contraction compared to the previous month. The ISM is based on a survey on whether conditions for manufacturing business are improving or deteriorating compared to the previous month, clearly measuring that on a YoY basis makes no sense as this is a snapshot of the manufacturing sector’s current momentum, rather than a comparison to the same month in the previous year, which would be a YoY analysis. Thus, this didn't signal a recession. My early expectations of early Fed cuts are rooted in structural inflation resolution from supply chain improvements.
I believe to discern the Fed's rate cut strategy, we need to understand the spread between the Fed funds rate and core inflation metrics (CPI and PCE). The disparity will signify the Fed's probable target spread, with the Fed funds rate presently surpassing core inflation. A resilient economic growth, as indicated by the Bloomberg Economic Growth Surprise Index, might lead the Fed to maintain a wider spread, hinting at 3-4 rate cuts. Conversely, a growth deceleration could validate a more aggressive 5-6 cuts. The sentiment indices from the Fed's communications suggest a preference for a narrower spread. I think Powell doesn't want to jump the gun on cuts, as I believe it would be humiliating for him to cut in May and hike in March due to a reacceleration in core inflation figures.
With inflation trending towards the Fed's 2% goal, my analysis suggests potential rate cuts in 2024, alongside an Gold reaching my target $2300-$2400.
The content provided here is for informational purposes only and should not be construed as investment advice, a solicitation, or recommendation to buy or sell any securities. It is not intended for qualified investors only. Users should conduct their own research or consult with a financial advisor before making investment decisions. The author does not guarantee the accuracy or completeness of the information and will not be held liable for any errors, omissions, or inaccuracies. Use this information at your own risk.
Disclaimer: The content provided here is for informational purposes only and should not be construed as investment advice, a solicitation, or recommendation to buy or sell any securities. It is not intended for qualified investors only. Users should conduct their own research or consult with a financial advisor before making investment decisions. The author does not guarantee the accuracy or completeness of the information and will not be held liable for any errors, omissions, or inaccuracies. Use this information at your own risk.