(Kitco News) -The gold market is seeing some renewed momentum as investors breathe a sigh of relief with consumer prices rising roughly in line with expectations.
The Consumer Price Index (PPI) rose 0.3% in April, following March's 0.4% increase, the Labor Department said on Wednesday. The latest inflation data was a tick lower than expected, as economists looked for a 0.4% increase.
The report said that in the last 12 months, wholesale inflation rose 3.4%. Annual inflation rose in line with expectations and fell from 3.5% in March.
Core inflation, which excludes volatile food and energy prices, increased 0.3% last month, rising in line with expectations. For the year, core inflation rose 3.6%.
The gold market was trading in positive territory ahead of the report and is seeing some new buying interest in its initial reaction to the latest inflation data. Spot gold last traded at $2,373.10 an ounce, up 0.66% on the day.
Although inflation remains stubbornly elevated, some analysts note that it is easing fears that the Federal Reserve could be forced to raise interest rates. Adam Button, Head of Currency Strategy at Forexlive.com, described the latest inflation report as a bit of a Goldilocks.
"This is good reading. It's not going to give the Fed confidence to cut rates, but it will dull talk of further rate hikes and problematic inflation. Combine it with today's weak retail sales data, and there's a developing picture of a softening economy," he said.
Michael Brown, Senior Research Strategist at Pepperstone, said that the latest inflation could relieve the Federal Reserve.
"Headline CPI cooled to 3.4% YoY, from a prior 3.5%, while the MoM headline figure came in softer than expected at 0.3%. More pleasingly, core CPI fell to 3.6% YoY, its lowest level since May 2021," he said.
The report said that rising shelter costs and higher gasoline prices were the most significant factors behind last month's inflation.
"Combined, these two indexes contributed over seventy percent of the monthly increase in the index for all items," the report said.
Looking at total energy costs, the energy index rose 1.1% last month and increased 2.6% for the year.
The food index was unchanged last month and increased 2.2% in the last 12 months, the report said.
Paul Ashworth, Chief North American economist at Capital Economics, said in a note that the data give the Federal Reserve room to cut rates in September.
Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His experiences include covering territorial and federal politics in Nunavut, Canada. He has worked exclusively within the financial sector since 2007, when he started with the Canadian Economic Press. Neils can be contacted at: 1 866 925 4826 ext. 1526 nchristensen at kitco.com @KitcoNewsNOW
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