 | Get all the essential market news and expert opinions in one place with our daily newsletter. Receive a comprehensive recap of the day's top stories directly to your inbox. Sign up here! |
(Kitco News) - The gold market continues to see some selling pressure as persistent inflation continues to embed itself in the broader economy, which some economists say could force the Federal Reserve to maintain their aggressive monetary policies longer than expected.
Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.3% last month, compared to January's increase of 0.3%. The inflation rose in line with economists' expectations.
However, in the last 12 months, core PCE inflation rose 4.6%, coming in a tick hotter than expected. According to consensus forecasts, economists were looking for a rise of 4.5%. At the same time, February's annual inflation data was revised higher to 4.7%.
Meanwhile, falling energy prices helped headline inflation continue its downtrend. The report said that PCE rose 0.3% last month, down compared to 0.6% reported in February.
For the year, headline PCE rose 5.0%, down from the prior increase of 5.3%.
The gold market is struggling to find any new bullish interest as prices continued to trade solidly below $2,000 an ounce. June gold futures last traded at $1,992.70 an ounce, down 0.27% on the day.
Inflation pressures continue to impact economic activity as consumers save more of their income while spending less. The report said that personal income rose 0.3% last month, following a 0.3% increase in February. The data was slightly stronger than expected, as economists were looking for a 0.2% increase.
Meanwhile, personal spending was unchanged last month following a downwardly revised increase of 0.1% in February. However, consumption was also slightly better than expected, as consensus forecasts called for a 0.1% decline.
Although core inflation remains stubbornly elevated, some economists and analysts have said that market reaction could be muted as the numbers are relatively in line with the hotter inflation data released in Thursday first-quarter GDP data.
However, gold could ultimately struggle in the near-term as markets continue to adjust their interest rate forecasts. Markets have all but priced in a 25-basis point hike for next week. At the same time, the CME FedWatch Tool shows that markets see a growing chance that the Federal Reserve could raise interest rates in June as well.
