(Kitco News) - Gold against the euro is bouncing off last week’s three-month lows as inflation continues to surge higher in the eurozone.
Monday, Eurostat, the EU’s official statistics agency, said that preliminary data shows its Consumer Price Index hitting a new record high of 10.7% for the year in October. The data was significantly hotter than expected as economists were looking for a rise of 9.9%.
The gold market in U.S. dollar terms is seeing solid selling pressure Monday as prices remains below $1,650 an ounce. However, spot gold against the euro is seeing a better performance following the inflation data, last trading at $1650.43 an ounce, relatively unchanged on the day.
An unprecedented rise in energy prices pushed European inflation above the 10% threshold. The energy index rose by 41.9% in October, up from 40.7% reported in September.
At the same time food prices rose 13.1%, up from the previous increase of 11.8%.
Economists expect that the latest inflation data will force the ECB to continue aggressively raise interest rates, even as the region’s economy push closer to a recession. Last week after raising interest rates by 75 basis points across the board, ECB President Christine Lagarde said that the committee’s focus remains in controlling inflation.
"In the present state of uncertainty, with the likelihood of recession looming much more on the horizon and the probability of it having increased, everyone has to do their job," Lagarde said. "Our job is price stability. This is our primary mandate and we are riveted to that."
Andrew Kenningham, chief European Economist at Capital Economics said that he doesn’t expect the ECB to pivot and slow the pace of its rate hikes anytime soon. He added that he expects rates to push to 3% by mid-2023.
