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Gold Back At $1,300 Following Weaker-Than-Expected CPI Data

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(Kitco News) - The gold market is picking up some momentum following data that shows U.S. inflation remained muted last month, creating further doubt of more Federal Reserve monetary policy action.

Friday, the U.S. Consumer Price Index rose 0.5% in September, after increasing 0.4% in August, the U.S. Labor Department said. However, this was weaker than expected; consensus forecasts were calling for a rise of 0.6%.

Monthly core inflation, which strips out volatile food and energy costs, rose 0.1%, following a 0.2% advance in July. Economists were expecting to see a 0.2% rise in price pressures.

December gold last traded at $1,302.60 an ounce in reaction to the weaker than expected inflation data.

The rise in headline inflation was due to another strong rise in gasoline prices. The gasoline index rose 13.1% last month, the report said, which has helped to push annual inflation up to 2.2%.

Annual core inflation, remained unchanged at 1.7%. While not the Federal Reserve preferred method of inflation data, the index does continue to show muted price pressures; vore CPI has been on a steady decline, falling from a high of 2.3% seen at the start of the year. This is the fifth consecutive month that core annual inflation has hovered at 1.7%.

The inflation data could start to shift expectations for further interest rate hikes from the Federal Reserve. Wednesday, the minutes of the September Federal Open Market Committee meeting showed that there is already growing concerns about the weak price pressures among some members of the committee.

Royce Mendes, senior economist at CIBC World Markets dismissed some of the inflation weakness as a result of the hurricanes that have impacted the nation. However, he showed some concern that core inflation remains at the lower end of its range for the year.

"Overall, the soft core CPI numbers will weigh on US yields, and provide a headwind for the US dollar today," he said.

Michael Pearce, U.S. economist at Capital Economics, also suggested that the weak inflation data could be atrtibuted to to the hurricane disruptions. He added that he expects prices to trend higher in the coming months.

"The September CPI report is unlikely to stop the Fed hiking rates again in December," he said.

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 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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