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Gold prices moving higher after U.S. CPI rises 6.8%, biggest jump since 1982

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(Kitco News) - Gold prices are pushing higher, following a stronger-than-expected rise in U.S. consumer prices.

Friday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.8% in November, after a 0.9% rise in October. The data beat consensus forecasts as economists were forecasting a 0.7% rise.

For the year, the report said that headline inflation rose 6.8%. The report said this is the "largest 12-month increase since the period ending June 1982."

Annual inflation rose in line with expectations. Some economists were bracing for inflation to rise above 7%.

Meanwhile, core CPI, which strips out food and energy costs, increased 0.5% last month, up from a 0.6% increase in October. The data was in line with expectations. For the year, core CPI is up 4.9%.

The gold market moved into positive territory in an initial reaction to the firm headline number. February gold futures last traded at $1,779.50 an ounce, up 0.18% on the day.

SocGen sees gold prices at $1,900 in Q2, no rate hikes until second half of 2022

Looking at some of the components of the report, consumers continue to feel the pinch of rising energy prices. The report said that the gasoline index increased 6.1% last month, pushing the energy index up 3.5%. For the year, energy prices are up 33.3%.

Food prices also increased, rising 0.7%. For the year, the food index is up 6.1%.

The report said that the rise in food and energy prices is the most in 13 years.

Katherine Judge, senior economist at CIBC, said that with inflation hitting another multi-decade high, the Federal Reserve could be on track to raise interest rates by June 2022.

"While December will see some relief from lower energy prices on omicron, causing total inflation to decelerate, there is scope for supply chain issues to prop up core goods prices again as omicron spreads globally and disrupts production," she said. With inflation at a lofty pace, the Fed is set to accelerate its QE tapering timeline at the December meeting, to finish in the early spring, and to allow for a rate hike in Q2 2022, when the winter wave of Covid could be behind us."

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