(Kitco News) - The gold market is trying to attract some new buying momentum as inflation pressures rise less than expected, and according to some economists could give the Federal Reserve room to slow the face of its aggressive rate hikes.
On a monthly basis, the core Personal Consumption Expenditures price index increased 0.1% last month, the U.S. Department of Commerce said on Friday. The inflation data was tamer than expected as consensus forecasts were calling for a 0.2% rise.
For the year core PCE rose 4.6%, down from June’s annual reading of 4.7%.
The gold market, while still under pressure is off its session lows in initial reaction to the latest inflation data. December gold futures last traded at $1,760.10 an ounce, down 0.65% on the day.
At the same time headline PCE dropped 0.1% last month. For the year headline PCE rose 6.3%, down sharply from June. The decline in headline inflation was due to a drop in energy prices, which fell 4.8% in July, the report said.
Although inflation is cooling, the data also showed weaker consumption data and earnings. The report said that personal income rose 0.2% in July, missing expectations. According to consensus forecasts, economists were looking for a 0.6% increase.
Meanwhile, personal spending increased 0.1%, also missing expectations. Economists were forecasting a 0.4% rise.
Although inflation pressures appear to be easing, some analysts have said that gold is not reacting to the data because consumer prices are still to high and the Federal Reserve will continue to aggressively raise interest rates.
Markets are now waiting to hear from Federal Reserve Chair Jerome Powell, who is expected to provide investors with a hawkish outlook on monetary policy at this year’s central bank symposium at Jackson Hole, Wyoming.
“We don’t expect the Fed suddenly to announce a pivot at Jackson Hole. But even better news on inflation over the coming months is likely to convince the Fed to change course next year, despite any hawkish rhetoric coming from officials now,” said Paul Ashworth, chief North America economist at Capital Economics.
