Gold prices and the Nasdaq 100 may face an extended downward correction following the release of recent consumer price and unemployment claims data on Thursday. The potential delay in achieving new all-time highs for both the precious metal and the technology index is indicated.
The December Consumer Price Index (CPI) report revealed an unexpected upside surprise, with the all-items index accelerating to 3.4% from the previous 3.1%. In terms of labor market data, last week’s jobless benefit applications hit a three-month low, suggesting minimal layoffs in the economy.
Despite inflation surpassing the Federal Reserve’s 2.0% target and a resilient job market, the central bank is likely to resist significant interest rate cuts in 2024. This contrasts with current market expectations of approximately 135 basis points of easing for the year.
While Treasury yields dipped on the day, the retreat may not be directly linked to Thursday’s data but possibly related to safe-haven demand following reports of potential airstrikes against Houthi rebels in Yemen by the U.S. and its allies.
Although geopolitical risks always pose uncertainty, the situation is expected to remain contained, avoiding escalation into a broader regional conflict in the Middle East. Yields are likely to resume their upward trend once the dust settles. However, to gauge their trajectory more accurately, traders should closely monitor statements from Federal Reserve officials.
Considering recent developments, traders should be prepared for a potential shift in Fed rhetoric towards a more hawkish stance. Policymakers may push back against a rate cut in March, emphasizing the need for more evidence on disinflation before taking action. Such a shift could have a bearish impact on precious metals and tech stocks.
Given the current risk-reward profile, both gold and the Nasdaq 100 may not be attractive at this moment. While the outlook could evolve with new information, traders are advised to exercise caution, avoiding impulsive actions in response to uncertain market rallies.
