US inflation data beats expectations across the board, stagflation risks emerging; gold faces short-term pressure but remains resilient in the long run

　　In the past two months, global inflation concerns have continued to intensify, and the market has gradually priced in the reality that the Federal Reserve

　　From Tuesday to Wednesday, the US released two major inflation data, CPI and PPI, both of which far exceeded expectations, further reinforcing inflation stickiness and driving the probability of a rate hike before the end of the year to over 30%. While gold prices are temporarily subdued by rate hike expectations, analysts believe that high inflation may drag the economy into a stagflation pattern. Gold's attributes as an inflation hedge and economic downturn hedge are becoming more prominent, and the medium to long-term bullish logic for gold remains intact.

　　Double inflation data exceed expectations, deviating from Fed policy targets

　　On Tuesday, the US Bureau of Labor Statistics released the Consumer Price Index data: overall US CPI rose 3.8% year-on-year, while core inflation (excluding food and energy) climbed to 2.8% year-on-year. These numbers surpassed market expectations, pushing inflation further away from the Fed's 2% target.

　　Following this, Wednesday's Producer Price Index once again shocked markets: in April, US wholesale prices soared 6.0% year-on-year, the largest annual increase since December 2022; core PPI rose 4.4% year-on-year, also marking a new high since February 2023.

　　With two successive inflation reports coming in far above expectations, market expectations for Fed policy have been completely upended. Current financial market pricing shows the probability of a Fed rate hike by the end of this year has already exceeded 30%.

　　Rising rate hike expectations pressure gold prices; gold market demonstrates resilience

　　Rising rate hike expectations increase the opportunity cost of holding non-yielding assets like gold, directly forming a bearish constraint on gold prices. However, in the context of broadly rising inflation, gold has not seen a sharp selloff; its price has remained in a narrow range below $4,700 per ounce. This has become a key short-term technical level, with the overall trend remaining weak but with limited downside space.

　　Global currency market analyst Fawad Razaqzada believes that persistently high inflation is eroding economic growth momentum, a hidden worry that provides implicit support for gold. He noted that high inflation coupled with a rising US Treasury yield curve bodes ill for risk assets. In recent years, gold has shown high correlation with US equities, making it vulnerable to sentiment in the short-term; yet in a high-inflation environment, rising demand for risk aversion and hedging underpins gold, determining its short-term pressure but medium- to long-term optimism.

　　Inflation transmission spreads; risk of US economic stagflation rises

　　In a Wednesday research note, Razaqzada analyzed that inflationary pressure has begun to drag on economic activity, and the US is moving toward a pattern of low growth and high inflation—stagflation. Just one day after the CPI surprise, the PPI delivered another huge upside shock, with April's wholesale price inflation fueling fears that the US economy may slip into stagflation.

　　The recent escalation in US-Iran tensions pushing up energy prices is only the beginning. The price surge is no longer confined to crude oil; upstream cost increases are gradually being transmitted throughout the entire industrial chain, with service sector inflation accelerating as well. This kind of top-down price transmission is the market's biggest fear, and means US inflation is highly sticky and unlikely to subside quickly.

　　Stagflation favors gold; investors now await retail sales data guidance

　　Currently, the market is now focused on Thursday’s upcoming US retail sales data. Under the dual constraints of high oil prices and persistent inflation, consumer sentiment will become a key basis for judging economic resilience, and will further influence Fed policy inclinations and subsequent moves in gold.

　　Summary

　　Overall, both US CPI and PPI surged far above expectations, with sticky inflation driving heightened expectations for Fed rate hikes and putting near-term pressure and volatility on the gold market. However, as inflation spreads across industries and the risk of stagflation rises, gold is gaining dual support as both a hedge and an inflation-proof asset, and the actual market has shown significant resilience against declines. In the short term, gold prices will remain constrained by policy expectations; in the medium to long term, the stagflation logic keeps fermenting, and the bullish pattern for gold remains unchanged. Future trends will largely depend on retail data and Fed policy signals.

Editor: Zhu Henan