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Gold Prices Holding $1,250 After Tame U.S. CPI Inflation Data

Kitco News

(Kitco News) - The gold market is holding on to a critical psychological level at $1,250 an ounce as the consumer price pressures remain relatively tame.

Wednesday, the U.S. Labor Department said its U.S. Consumer Price Index was unchanged in November after increasing 0.3% in October. The flat reading was in line with consensus expectations. For the year inflation increased 2.2%, up a tick from October's reading.

Monthly core inflation, which strips out volatile food and energy costs, rose 0.2%, following a 0.2% increase in October. The data was also in line with expectations.Annual core inflation increased 2.2%.

"The 2.2% core inflation figure suggests that the Fed's preffered measure of core price pressures, core PCE, should rise to be within a hair of their 2% target," said Katherine Judge, senior economist at CIBC World Markets.

Gold prices are holding on to modest gains as reaction has been muted to the inflation numbers. February gold futures last traded at $1,250.70 an ounce, up 0.28% on the day.

According to some commodity analysts, the lackluster inflation data could be positive for gold prices in the near-term as it would support a dovish outlook from the Federal Reserve. Economists have noted that the U.S. central bank has room to slow its tightening policy as consumer price pressures remain well anchored.

According to the report, a drop in gasoline prices had a significant impact on headlien inflation. the Gasoline Index dropped 4.2% last month. The decline does not come as a big surprise as crude oil prices fell sharply last month, declining from its October four-year high.

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