Inflation turned into deflation as consumer prices came in at -.1 percent in October, while the annual inflation rate is the lowest in four years.
The CPI data, ex-energy and food, was a tepid .1 percent, rising by the same margin for the last three months. Domestic demand in the US is suppressing inflation, and the lack of demand is hitting the labor market.
Gold took it on the chin, falling over $16 per ounce and breaking weekly support at $1,267. The bearish trend continues in the absence of inflation, and it is likely to continue throughout the end of the year leading to gold’s first annual decline in over a decade.
The five year weekly chart shows the overall decline over recent years since it’s high of $1,923.7. Gold than became range bound before sinking after a failed attempt to break above $1,800.
Currently trading at $1,257 per ounce, gold could take the next train south to $1,200. A move down to these levels could be troublesome for the precious metal because it would likely test the yearly low of $1,179. Depending on the news and sentiment surround this potential outcome, gold would continue lower to $1,100.
Potential upside has a price action resistance level of $1,317. Today, the FOMC will release their statement and no tapering is the general consensus. However, gold continues this downtrend given the many previous months of taper speculation that has come up short.