(Kitco News) - The gold market has pushed to session highs and is within striking distance of $2,050 an ounce as the Federal Reserve’s preferred inflation gauge shows consumer prices rising in line with expectations.
Thursday, The U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.4% last month, compared to December’s increase of 0.1%.
In the last 12 months, core inflation has risen by 2.8%, falling from January’s increase of 2.9%, the report said. Annual inflation also rose in line with expectations. Annual inflation rose at its slowest pace since March 2021.
The gold market is seeing solid bullish momentum in its initial reaction to the latest inflation data. April gold futures last traded at $2,048 an ounce, up 0.26% on the day.
Meanwhile, headline inflation rose 0.3% last month. For the year headline inflation rose 2.4%.
According to some economists, the latest inflation data does little to change expectations around the Federal Reserve’s monetary policy. Markets have all but priced out a rate cut next month and see the easing cycle starting in June.
According to the CME FedWatch Tool, markets see a roughly 60% chance of a rate cut in June, roughly unchanged from Wednesday.
The data also shows that the Federal Reserve doesn’t have to rush into a new easing cycle as American workers see wage growth. The report said personal income rose 1.0% last month, significantly beating expectations. According to consensus forecasts, economists expected a 0.4% increase.
At the same time, spending has cooled slightly, rising 0.2%, which is in line with expectations and down from a 0.7% increase in December.
Paul Ashworth, Chief North American Economist at Capital Economics, said that he expects inflation to continue to trend lower.
“There is still plenty of disinflation coming this year, which means that the annual rate of core PCE inflation will be close to the 2% target by mid-year.
