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Gold Struggles As CPI Sees Biggest Increase In 4 Years

Editor's Note: Updating earlier story with more details from report and comments from RBC's George Gero.

(Kitco News) - Gold remains under considerable pressure after inflation data sees its biggest rise in four years.

Wednesday, the U.S. Labor Department said that the Consumer Price Index for January rose 0.6%, following a 0.3% rise in December. Economists were expecting to see a rise of 0.3%.

“The January increase was the largest seasonally adjusted all items increase since February 2013,” the report said.

The report added that annual inflation is now at 2.5%, posting its biggest year-over-year gain since March 2012. Annual inflation in December came in at 2.1%. The report noted that rising gasoline prices accounted for nearly half the increase in inflation. Last month the gasoline index rose 7.8%.

After stripping out volatile food and energy prices, core inflation rose 0.3% last month, following an increase of 0.2% in December; consensus forecasts were calling for a rise of 0.2%.

Gold prices were modestly higher ahead of the report although falling under pressure since the start of the week; as of 8:32 a.m. EST, Comex April gold traded at $1,222.50 an ounce, down $2.90 on the day.

One market veteran noted that although Thursday’s economic data would encourage the Federal Reserve to hike rates, inflation seems to be creeping up, which would be positive for gold.

“The economics today bolster rate hikes as CPI is up 0.06% in January, retail sales (excluding autos) up 0.8% and 10-year at 2.50% and dollar index above 101,” said George Gero, managing director for RBC Wealth Management, in an email to clients.

“All these headwinds for gold may continue through the week, but inflation is around the corner along with political uncertainties in euro zone as well,” he added.

By Sarah Benali of Kitco News; sbenali@kitco.com

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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