Ground Breakers: Gold miners down (but not hammered) as inflation bites, energy rules

US inflation print sees gold price drop, but not by much
Goldies will be on edge with economists predicting more 75bps rate rises to come
Energy stocks lead market higher

Economists have raised their expectations of 75bps rate rises in the coming months from the US Federal Reserve after the CPI print rose 0.4% month on month.

Headline annual inflation fell just 0.1% on August’s print to 8.2%, but ANZ’s Jack Chambers warns that largely came down to a dip in energy prices.

With food and energy removed, inflation rose 0.3% to 6.6%, triggering concerns that the pace and severity of rate rises will stay high.

“A 75bp hike in November is now looking like a lock, and unless something changes soon, this could be followed by another 75bp in December,” Chambers said.

That’s bad news for precious metals. Gold dipped slightly by around US$14/oz to US$1,660/oz.

The relatively mild drop suggests some of the inflation concerns were already baked in by the market. Should those hefty rate rises come to fruition though, it could be a turbulent couple of months for ASX gold miners.

On an overall positive day for the local market the All Ords Gold sub-industry index dropped 0.54% this morning.

But the damage could have been far worse. Large cap goldies Northern Star (ASX:NST) and Newcrest (ASX:NCM) were close to break-even as a wave of positivity and or morphine swept over the ASX 200.

Pilbara Minerals (ASX:PLS) continued to drop after yesterday’s fall, linked to a bearish Morgan Stanley note on lithium prices in China.

Gold miners share prices today:

Energy stocks up the wazoo

Santos (ASX:STO) and Woodside (ASX:WDS) were both up around 4% as the energy sector climbed 3.66% after LNG and crude oil prices rose overnight.

ANZ’s Chambers said supply tightness was winning out over falling demand, noting that the IEA has warned of a recession risk after OPEC+ announced production cuts last week.

“Capacity constraints are already reducing the output of OPEC members, while Russian oil sanction could tighten global supply. Further, talks around the Russian oil price cap are complicating things. These developments create a perfect backdrop for volatile prices.”

Volatile indeed.

Meanwhile, iron ore futures in Singapore rebounded off a 2022 low this morning, with 62% iron ore rising 1% to US$92.90.

Mill restrictions ahead of China’s National Congress have knocked down prices for Australia’s biggest export commodity this week, with Xi wanting to ensure “clear skies” for the political gathering in Beijing.

The big iron ore miners were all up more than 1% this morning, leading the materials sector to a 1.26% gain.