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Gold Prices Off Their Highs Following 0.3% Rise In U.S. CPI

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(Kitco News) - Gold prices off their highs but are still holding strong gains as consumer inflation pressures rose in line with expectations last month.

Tuesday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.3% in July, after a 0.1% rise in June. The data in line with consensus forecasts. The report added that rising gasoline prices was a factor that impacted headline inflation, rising 2.5% last month, following June’s -3.6% reading.

The report said that annual inflation rose 1.8% last month, up from June’s reading of 1.6%.

Stripping out volatile food and energy prices, core inflation rose also rose by 0.3%, which was slightly better than expected. Consensus forecasts were calling for a rise of 0.2%.

"The July rise was broad-based, with increases in the indexes for shelter, medical care, airline fares, household furnishings and operations, apparel, and personal care all contributing to the increase," the report said.

For the year, core inflation rose 2.2% last month, up from 2.1% seen in June.

Gold prices are were up more than 1% on the day ahead of the inflation numbers and have seen little changes in initial reaction. Analysts note that inflation is not a major barrier for potential rate cuts next months. December gold futures last traded at $1,532.20 an ounce, up 1% on the day.

Avery Shenfeld, senior economist at CIBC, said that although CPI data won’t stop the Federal Reserve from cutting rates again, he warned that inflation is inching closer to its 2% target level.

“Overall, not enough to sway the Fed from an upcoming ease, but a reminder to the bond market that, in contrast to Europe and Japan, inflation in the US is just not that low,” he said.

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