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Gold prices holding major gains above $1,800 as U.S. core PCE rises 5% in October

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(Kitco News) - The gold market is holding solid gains above $1,800 an ounce but is not seeing any new momentum following weaker-than-expected inflation data.2

On a monthly basis, the core Personal Consumption Expenditures Price Index increased 0.2% last month, the U.S. Department of Commerce said on Thursday. The inflation data was cooler than expected, as consensus forecasts called for a 0.3% rise.

On an annual basis, inflation rose 5.0%, down from September's reading of 5.2%. Inflation is now back to levels seen in June.

Gold prices are not seeing much reaction to the inflation data; however, the market has done a lot of heavy lifting in overnight action. February gold futures last traded at $1,803.60 an ounce, up nearly 2.5% on the day.

According to analysts, the gold market is seeing new bullish momentum as investors continue to digest dovish comments from Federal Reserve Chair Jerome Powell. Speaking at an event Wednesday hosted by the Brookings Institution, Powell said that it would be appropriate to slow the pace of rate hikes going forward.

"One risk management technique is to go slower and feel our way to what we think is the right level. Another is to hold on longer at a high level and not loosen policy too early," he said.

Some analysts have said Powell's comments could signal that the U.S. central bank is closer to pivoting on interest rates; however, markets still see a terminal rate of more than 5% in the first half of 2023.

Along with cooling inflation, the report also noted more positive news for consumers as personal income expanded last month, rising 0.7%, following a 0.4% rise in September. The data beat expectations as economists were looking for a 0.4% rise.

Meanwhile, the report said that personal spending increased 0.8%, rising in line with expectations.

Paul Ashworth, chief North America economist at Capital Economics, noted that the latest consumption data shows that U.S. consumers continue to remain resilient in the face of rising interest rates. He added that lower inflation pressures are helping to boost spending.

"The upshot is that we now think fourth-quarter real consumption growth will be as strong as 4.0% annualized but, as net external demand is now likely to act as a drag, overall GDP growth is on track for a more modest 1.5% gain," he said.

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