The stronger-than-expected US CPI data for March may have sent the dollar and Treasury yields higher but commodity prices largely shrugged off the news. Indeed, precious metals rose strongly this week, with gold prices breaking a new intra-day record today.
Gold prices have been divorced somewhat from their usual drivers: 10-year TIPS yields and the US dollar. While the muted March producer price inflation would have lifted prices this week, we suspect that Chinese safe-haven buying is also a key driver. For other commodities, the relationship with Treasury yields is far weaker and we expect that US monetary policy will only have a small role to play in driving non-precious metals prices over the year ahead.
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