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(Kitco News) – Gold prices remain under modest selling pressure as they largely ignore stable but elevated inflation pressures.
Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.3% last month, compared to August’s increase of 0.1%. However, consumers prices are rising in line with expectations
Meanwhile, inflation in the last 12 months rose 3.7%, down a tick from the precious month’s increase 3.8% increase. Annual inflation also rose in line with economist forecasts. Looking at the broader trend, inflation remains stubbornly high, more than double the Federal Reserve’s target of 2%.
The gold market remains relatively stable even as the U.S. economy faces persistent inflation pressures. December gold futures last traded at $1,994.80 an ounce, down 0.12% on the day.
The latest inflation data is not having much impact on interest rate expectations as the market sees nearly a 100% chance that the Federal Reserve will leave interest rates unchanged next week. Although inflation remains high, some analysts note that it is reading in the right direction.
“The upside surprises on consumption and headline PCE shouldn’t be a surprise after yesterday’s GDP but the ongoing drop in core should give the Fed some comfort. That said, consumption has to slow down at some point if the Fed wants to get on top of inflation,” said Adam Button, chief currency strategist at Forexlive.com.
Along with easing inflation, the data also notes further cracks in the economy as personal income rises less than expected, increasing 0.3%. Economists were expecting to see a 0.4% increase.
However, income is not keeping up with consumption as personal spending increased 0.7%. Economists expected a 0.5% increase. Analysts note that consumers continue to survive on credit as savings dwindle, which could be difficult as the Federal Reserve maintaines interest rates higher for longer.
“The stronger gains in real consumption and the core PCE price index in September are a potential concern for Fed officials, but won’t be enough to convince them to resume raising interest rates next week, particularly when there are still good reasons to expect both inflation and real economic growth to weaken over the coming months,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
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