Gold Prices Remain Below $1,200 Following Tame Inflation Data
(Kitco News) - Gold prices are seeing little reaction and remain below critical psychological level at $1,200 an ounce as inflation pressures were muted last month.
Friday, The U.S. Department of Commerce said that Personal Consumption Expenditures Index increased 0.1% in August, in line with expectations. For the year, the data showed that inflation increased by 2.2%, up from July’s reading of 2.3%.
Meanwhile, core PCE, which strips out volatile food and energy costs and is the Federal Reserve’s preferred inflation measure, was unchanged on the month, a tick down from expectations.
For the year core inflation remained steady at 2%, in line with the central bank’s inflation target. Inflation has traded at 2% since May.
Gold price are seeing little reaction as it appears tame inflation supports current monetary policy, according to some analysts. December gold futures last traded at $1,187.70 an ounce, up 0.03% on the day.
Although the latest data points to tame inflation pressures, many analysts and economists are warning that there are growing risks in the economy, particularly as the U.S. and China settle in to what appears to be a protracted trade war.
Fed Chairman Jerome Powell, even acknowledged the risks of a protracted trade war in his press conference following the central bank’s monetary policy meeting. However, he added that the committee’s base case scenario.
#tradewar Powell said there are highers risks with a protracted trade war. “A more protectionist world will be bad for the U.S. economy and U.S. families.”— Kitco NEWS (@KitcoNewsNOW) September 26, 2018
Even with the growing threat of trade tariffs, the Fed doesn’t see higher inflation pressures. Powell continues to see inflation holding around 2%.— Kitco NEWS (@KitcoNewsNOW) September 26, 2018
In a recent interview with Kitco News, George Milling-Stanley said that inflation remains one of the biggest risks that investors are ignoring as they focus on unstainable short-term momentum.
Although inflation is relatively muted, U.S. consumers continue to spend money. The latest data shows personal spending last month increased 0.3%, in line with expectations.
However, personal income slightly missed expectations, increasing 0.3% last month. Consensus forecasts were calling for an increase of 0.4%.