Kitco Commentaries | Opinions, Ideas and Markets Talk

Featuring views and opinions written by market professionals, not staff journalists.

Today the BEA (Bureau of Economic Analysis) released the PCE (personal consumption expenditures) for April 2022. This report is the preferred inflation gauge used by the Federal Reserve as a key component to shape their forward guidance of monetary policy.

In the case of today’s report, the data indicates both positive changes in the rate that inflation is rising and also indicates that inflation continues to run extremely hot and remain extremely persistent.

First and foremost, inflationary pressures in April rose 0.2% year-over-year. Although inflation continued to rise in April, the gain of 0.2% is a welcome deceleration when compared to the 0.9% gain in March. On a monthly basis, today’s report revealed a slight decline in inflation from 6.6% in March to 6.3% in April. This is the first decline in a year and a half.

Because both the CPI and PCE inflation indexes showed fractional declines month over month concerns remain elevated. Inflation is still at an extremely elevated level at levels not seen in the last 40 years. While the reports indicate a fractional decline in overall inflation it does not take into account certain sectors which continue to spiral out of control. According to the BEA, energy prices increased by 30.4% and food prices increased 10% in April. In other words, essential goods such as food and energy continue to spiral higher with no data to support that these costs will abate anytime soon.

Inflationary pressures began as the global recession began to conclude and pent-up demand exceeded the ability of companies to produce and ship those goods. However, new events continued to pressure both energy and food costs, and those pressures continue to this day.

According to the New York Times, “The slowdown in inflation in April was largely the result of a drop in the price of gasoline and other energy. Gas prices soared in February and March largely because Russia invaded Ukraine, then moderated somewhat in April.

They have risen again in recent weeks, however, which could push measures of inflation back up in May. Food prices have also been rising quickly in recent months, a pattern that continued in April.”

Additionally, China’s recent uptick in Covid 19 infections has caused a major decline in the delivery of exported products globally. Collectively China and Russia continue to impact the supply chain issues and bottlenecks.

Gold had moderate gains today with the June 2022 futures contract currently fixed at $1850.60 after factoring in today’s gain of three dollars.

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