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Gold Inches Higher After U.S. CPI Rises 0.2% During August

Kitco News

Editor's Note: Updating earlier story with more details from report, comments from analyst.

(Kitco News) - Gold prices ticked from slightly lower to modestly higher Thursday after a softer-than-forecast government report showing U.S. consumer prices increased by a seasonally adjusted 0.2% during August.

The core index for the Consumer Price Index, excluding the volatile food and energy sectors, was up 0.1%. The Bureau of Labor Statistics said this was the smallest increase since April.

Going into the report, consensus expectations compiled by news organizations had been for a rise 0.3% in the headline figure and 0.2% in the core rate.

As of 8:48 a.m. EST, spot gold was $3 higher at $1,209.10 an ounce. The metal had been at $1,205.20 two minutes before the CPI report.

“Today's CPI figures echoed some of the softness seen in producer prices yesterday, with both headline and core measures coming in below consensus expectations,” said Andrew Grantham of CIBC Economics.

Increases in shelter and energy costs were the main contributors to the increase in overall CPI, the Labor Department said. The energy index increased 1.9% in August, including a 3% gain in the gasoline index. The shelter index rose 0.3 percent in August.

On a year-on-year basis, overall CPI rose 2.7%, the Bureau of Labor Statistics said. The core rate was up 2.2%.

While the report was softer than forecast, Grantham pointed out that core CPI is still consistent with core personal consumption expenditures running only slightly under the Fed's 2% target. As a result, the data “won't change the near-term debate regarding rate hikes,” Grantham said. “However, if core inflation doesn't pick up more meaningfully next year, that would result in an even more gradual pace of rate hikes.”

As a result, he concluded, the CPI data may be “slightly negative” for the U.S. dollar and long-term yields may “fall a little.” 

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