Gold Prices Remain Flat On The Day Following Mixed US CPI
(Kitco News) - Gold prices remain on the back foot, unchanged on the day even following mixed consumer inflation data last month.
Thursday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.1% in June, after increasing 0.2% in May. The increase was slightly weaker than expected.
For the year, the report said that consumer inflation rose 2.9%, which was in line with expectations. While gasoline index rose 0.5% last month, the report noted that energy costs as a whole dropped, with the energy index falling 0.3% in June.
Monthly core inflation, which strips out volatile food and energy costs, rose 0.2%, following a 0.2% increase in May. Economists were expecting to see a 0.2% rise in price pressures.
Annual core inflation rose to its highest level in six years, increasing to 2.3%.
Gold prices have been under significant selling pressure for the last two days as global trade tensions have roiled all financial markets. One of the only assets that has attracted investor capital is the U.S. dollar, which is a headwind for the yellow metal. August gold futures last traded at $1.244.60 an ounce, up 0.2% on the day.
To the frustration of many gold investors, the yellow metal, which is traditionally a hedge against rising price pressures, is not benefiting from rising inflation. According to some commodity analysts, gold is struggling because higher inflation is putting pressure on the Federal Reserve to raise interest rates, which is boosting the U.S. dollar.
While inflation is pushing higher, Royce Mendes, senior economist at CIBC said that it won’t prompt the Fed to act more aggressively than it has already signaled. He added that the numbers shouldn’t have much impact on markets.
“A trend-like monthly gain of 0.2% on the core measure left it tracking 2.3%, also a tick faster than what was seen in May. That should have the Fed's preferred measure of inflation, core PCE prices, still tracking the central bank's 2% target,” he said.
In the last economic projections, the Federal Reserve signaled that it could raise interest rates two more times this year.