Trading Inflation » Day Trader Guide

Trading Inflation

The entire western world is under a deflationary attack, meaning prices are not rising but dropping, or at least not rising even close to what central banks are used to.

The first reason for this is slow global growth which started after the 2008 crisis and the second reason is China’s slowdown which pushed commodity prices to very low levels.

Interest rates rise when central banks expect higher prices or in other words higher inflation.

The Federal Reserve should decide on its interest rate on June 15th and today a very important indication for that will be published.

The Federal Reserve doesn’t use CPI to understand inflation but it uses an index called Core PCE, which will be published today at 12:30 gmt.

The expected number is 0.2% and any number above that should support the dollar and push gold lower.

Gold is trading around $1204 an ounce and has dropped $100 in just one month!

The commodity can cross the $1200 an ounce support level today towards $1188 an ounce on a high PCE report.

Traders can diversify their portfolio by adding silver which is positively correlated with gold.

 

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