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Gold attempts to erase overnight losses as inflation beats expectations in June

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(Kitco News) Gold prices rose following June's inflation data, which came above market expectations.

The U.S. Consumer Price Index rose 0.6% in June after falling 0.1% in May, the U.S. Labor Department said on Tuesday. Consensus forecasts were calling for a rise of 0.5%.

Annualized inflation came in as expected in June – at 0.6% after posting a 0.1% advance in May.

In an immediate reaction to the data, gold prices edged up, trying to erase overnight losses, with August Comex gold last trading at $1,807.20, down 0.38% on the day. 

Prior to the release, gold was lower on some routine profit-taking after recently seeing nine-year highs, said Kitco’s senior analyst Jim Wyckoff.

“Bullish charts and worrisome geopolitical elements will likely have the bulls soon stepping in to buy the dip,” wrote Wyckoff on Tuesday.

Monthly core inflation, which strips out volatile food and energy costs, came in as expected, up 0.2% in June, following a negative 0.1% figure in May. Annualized core inflation was at 1.2% versus the expected 1.1%.

The rise in inflation was largely led by rising gas prices, according to the report. The energy index was up 5.1% in June, with the gasoline index jumping 12.3%, the report said. Also, the food index saw a gain of 0.6% on the month.

With the recovery in the U.S. being fairly slow, the core inflation expectations remain “tame,” wrote CIBC Capital Markets economist Katherine Judge. “Even if certain goods categories see upwards pressure as a result of supply chain issues upon reopening, weakness in services is expected to overshadow that, given the higher weight on services in the core CPI basket,” Judge wrote.

Live 24 hours gold chart [Kitco Inc.]

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