Gold price drops below $1,950 as Fed's preferred inflation indicator comes in hotter than expected

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(Kitco News) Gold lost more ground after the U.S. annual core PCE price index came in at 4.7% in April versus the consensus forecast of 4.6%.

In March, the Federal Reserve’s preferred inflation measure was at 4.6%.

On a monthly basis, the core PCE price index was up 0.4% versus the expected 0.3% in April, according to the data published by the U.S. Department of Commerce on Friday.

The U.S. central bank favors this gauge because the core inflation strips out volatile food and energy prices.

The report also showed that personal spending was stronger-than-expected, coming in at 0.8% versus 0.4%, while personal income was up 0.4% last month. Also, real personal consumption rose 0.5% in April.

“The $151.7 billion increase in current-dollar PCE in April reflected an increase of $86.9 billion in spending for services and a $64.8 billion in spending for goods. Within services, the largest contributors to the increase were spending for financial services and insurance, health care, and ‘other’ services (notably professional and other services),” the report said. “Within goods, spending for motor vehicles and parts (led by new motor vehicles).”

Gold fell following the data release, with June Comex gold futures last trading at $1,946.80 an ounce, up 0.16% on the day. Earlier in the session, the daily high was $1,957.10 an ounce. Inflation not coming down fast enough could increase bets that the Federal Reserve still has more room to tighten.