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Gold price sees some modest profit taking, but holding above $1,900 as U.S. CPI rises 6% in February, in line with expectations

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(Kitco News) - The gold market is holding on firm above $1,900 an ounce but is not seeing any new momentum as U.S. inflation data remains persistently high, threatening to become embedded in the broader economy.

On Tuesday, the U.S. Labor Department said its much-anticipated Consumer Price Index rose 0.4% last month, following a 0.5% rise in January. The data was in line with expectations.

For the last 12 months, the report said that annual inflation rose 6.0%, down from 6.4% from January. "This was the smallest 12-month increase since the period ending September 2021," the report said.

The annual inflation data also rose in line with expectations.

According to some market analysts, the rise in core inflation indicates that rising consumer prices are becoming embedded in the broader economy. Annual core inflation rose 5.5% for the year, in line with expectations.

According to some market analysts, the rise in core inflation indicates that rising consumer prices are becoming embedded in the broader economy.

The gold market, which saw significant gains Monday due to the threat of a U.S. banking crisis, is not seeing much reaction to the latest inflation data. April gold futures last traded at $1,912 an ounce, down 0.23% on the day.

Gold prices rallied to a six-week high Monday as the world reacted to growing stress in the U.S. banking sector after the government regulators took over California's Silicon Valley Bank Friday and New York-based Signature Bank Sunday. However, the government has calmed some fears after announcing that all depositors would be made whole.

Looking at specific inflation data, the report said that rising shelter costs were the biggest driver of consumer prices last month, accounting for 70% of headline inflation.

Meanwhile, the report said that the food index rose 0.4% last month; at the same time, the energy index decreased 0.6 percent over the month as the natural gas and fuel oil indexes both declined.

The growing stress in U.S. financial markets coupled with stubborn inflation shows how difficult the path the Federal Reserve has to walk.

Some analysts have said that it's unlikely the Federal Reserve will be able to get inflation under control as its aggressive rate hikes will break financial conditions and push the economy into a recession.

Analysts have said that these shifting interest rate expectations and rising safe-haven demand should continue to support gold prices through the rest of the year. Many analysts continue to expect gold prices will hit record highs this year.

"You want to buy gold when you can at least see the top in the Fed Funds rate and its close," said Adam Button, chief currency strategist at, in a recent interview with Kitco News.

Andrew Hunter, deputy chief U.S. economist at Capital Economics said that while inflation remains stubornly high, the Federal Reserve will now be more focused on the growing threat of a major banking crisis.

"At face value, the ongoing strength of inflation presents a dilemma for the Fed as it focuses on maintaining financial stability. But even if the current crisis ends up being resolved relatively quickly, we suspect the resulting tightening in credit conditions will still do lasting damage to the economy," he said in a note Tuesday.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.