(Kitco News) - The gold market remains under pressure as inflation, falling to session lows after inflation pressures rose more than expected in June.
Wednesday, the U.S. Labor Department said its Consumer Price Index rose 1.3% in June after a 1.0% rise in May. The data beat consensus forecasts as economists were forecasting a 1.0% rise.
For the year, inflation rose to 9.1%, significantly beating expectations. Economists were looking for inflation to rise 8.6%. According to the report, annual inflation has risen to the highest since November 1981.
Stripping out food and energy prices, core inflation also came in hotter than expected, rising 0.7%, following May's rise of 0.6%. According to consensus forecasts, economists were looking for a 0.5% rise. For the year, core inflation rose 5.9%.
The gold market is not seeing any new bullish momentum as an inflation hedge, despite the hotter-than-expected reading. August gold futures last traded at $1,715.90 an ounce, down 0.54% on the day.
According to some market analysts, gold remains under pressure as the latest inflation data supports further aggressive monetary policy tightening from the Federal Reserve.
Adam Button, chief currency strategist at Forexlive.com, said that markets are now pricing in a 23% chance of a 1.00% rate hike late this month.
"On headline shock alone, 'above 9%' isn't pretty for Main Street and the Fed will have a hard time softening its stance," said Button.
The report noted that the rise in consumer prices was broad-based; however, rising energy prices continue to dominate the market. The report said the energy index rose 7.5% last month and "contributed nearly half of the all items increase." The gasoline index rose 11.2%.
The report said that food prices rose 1.0% last month.
Katherine Judge, senior economist at CIBC, said that the ‘stunning’ inflation report will add some urgency to the Fed’s hiking path; however, she added that she doesn’t see the pace increasing this month.
“Overall, this data clearly supports a 75bp hike from the Fed later this month,” she said.
