Gold Whipsaws as Solid EU Inflation is Offset by a Decline in Jobless Claims

Gold prices are consolidating initially moving higher following the stronger than expected EU inflation data but then reversing following strong U.S. claims data.  Personal income and spending also rose in April, which helped buoy the greenback.  Gold prices are forming a bull flag pattern which is a pause that refreshes higher. Support is seen near the 10-day moving average at 1,297. Resistance is seen near the May highs at 1,326. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices.

U.S. initial jobless claims fell

U.S. initial jobless claims fell 13k to 221k in the week ended May 26, just off nearly 5-decade lows, following the 11k increase to 234k in the May 19 week. That left the 4-week moving average at 222.25k versus 219.75k. Continuing claims slid 16k to 1,726k in the May 19 week after bouncing 30k to 1,742k in the prior week (revised from 1,741k). The BLS said Puerto Rico estimated claims last week.

U.S. personal income rose

U.S. personal income rose 0.3% in April, with spending up 0.6%. The 0.3% increase in income in March was revised down to 0.2%, with the 0.4% March spending gain bumped up to 0.5%. Income is up 3.6% year over year, while spending is 4.5% year over year higher. Compensation was up 0.3% versus the prior 0.2% gain. Wages and salaries increased 0.4% after rising 0.2% in March. Disposable income was up 0.4% too versus the prior 0.2% gain. The savings rate slowed to 2.8% versus 3.0%.

The PCE chain price index was up 0.2% from the prior unchanged reading. The core rate rose 0.2% as well, the same as the previous March gain. On a 12-month basis, the headline price index was steady at 2.0% year over year, with the core rate flat as well at 1.8% year over year. Real spending increased 0.4% in April after March’s 0.5% gain. This is a decent report and the bond market will like the still tame inflation readings, especially since the data are the Fed’s preferred measures.

Eurozone HICP inflation jumped

Eurozone HICP inflation jumped to 1.9% year over year from 1.2% year over year in the previous month. A tad lower than we feared after above 2% readings from France, Germany and Spain, also thanks to Italy, where inflation ticked higher, but at 1.1% year over year remains far below the Eurozone average, largely thanks to negative base effects from changes to education charges, which will fall out of the equation in October. The rise in the Eurozone number from just 1.2% year over year in the previous month leaves the headline rate pretty much in line with the ECB’s definition of price stability.