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Gold Prices Holding Steady Following In-Line U.S. CPI Data

Kitco News

(Kitco News) - Gold prices are holding on to gains, just below critical resistance at $1,300 an ounce as inflation pressures remained relatively muted last in 2018, consumer inflation data last month.

Friday, the U.S. Labor Department said its U.S. Consumer Price Index declined 0.1% in December, after November’s unchanged reading The data was in line with consensus forecasts. For the year, headline inflation rose 1.9%.

According to the report, a drop in gasoline prices was the biggest factor on tame price pressures last month. The gasoline index dropped 7.5% last month.

“This decline more than offset increases in several indexes including shelter, food, and other energy components,” the report said.

In total, the energy index fell 3.5% last month.

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

For the year core inflation rose 2.2%, unchanged from November’s reading.

Gold prices have been maintaining a fairly even keel as pries hold on to most of its recent gains, trading near a six-month high. The in-line economic data is having little impact on the yellow metal. February gold futures last traded at $1.291.70 an ounce, up 0.35% on the day.

Inflation data has seen renewed focus from markets as this could be the one factor that determines how aggressive the Federal Reserve will be in raising interest rates this year.

Thursday at an event in Washington, Federal Reserve Chairman Jerome Powell, reiterated his stance that because of tame inflation pressures, the central bank can be patient and wait to see how the economy does to determine the next interest rate hike.

Katherine Judge, senior economist at CIBC World Markets, said that the latest inflation data supports the view that the Federal Reserve can be patient on future rate hikes.

“With little indication here that the acceleration in wage pressures or tariffs are causing any pickup in inflation, the Fed can take a pause in Q1 on raising rates to assess the health of growth indicators,” she said. “As such, we continue to expect only one hike in 2019, materializing in Q2.”

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