Top Stories This Week: Gold Reacts to CPI, Debt Ceiling Looms; Livent/Allkem to Merge

All eyes were on the latest inflation data out of the US this week. The consumer price index (CPI) rose 0.4 percent month-on-month in April and 4.9 percent year-on-year, which was the first reading under 5 percent in two years.

Core inflation, which removes food and energy from the equation, came in higher, up 5.5 percent year-on-year.

Market watchers are largely taking the CPI stats as a sign that the US Federal Reserve's efforts to tame inflation are working. It hiked interest rates again last week, bringing the target federal funds rate to a range of 5 to 5.25 percent.

Gold leaped up to US$2,045 per ounce in the immediate aftermath of the CPI news, but had pulled back to the US$2,015 level by the time of this writing on Friday (May 12). The yellow metal fares well when interest rates are low, and it seems to be reacting to the increased possibility of a pause or even a pivot at the Fed's next meeting, scheduled for June 13 to 14.

Beyond the Fed and inflation, a long list of factors continues to affect gold. Concerns about the banking sector remain, with PacWest Bancorp (NASDAQ:PACW) now generating headlines, and the US debt ceiling attracting attention as well — if it's not raised by June 1, the country may default, a situation that would have major global consequences.

That said, it's worth noting that the US has never defaulted on its debt — in fact, since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend or revise the definition of the debt limit.

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