(Kitco News) - The gold market spiked to session highs after the latest data showed U.S. inflation improving beyond expectations last month.
The U.S. Department of Commerce announced on Friday that its core Personal Consumption Expenditures (PCE) price index rose 0.2% in April. The data was better than expectations, as the consensus of economists was for a 0.3% month-over-month increase.
Annual core PCE came in at 2.8% in April, unchanged from March and in line with the consensus. Inflation still remains well above the Federal Reserve’s target of 2%.
The report said headline inflation rose 0.3% last month, in line with expectations, while annual headline inflation also met expectations with a 2.7% reading.
The gold market rallied on the better-than-expected inflation report, with spot gold hitting a session high of $2,350.16 in the minutes following the release. Spot gold last traded at $2,346.71 an ounce at the time of writing, up 0.15% on the day.
The Federal Reserve is facing a challenging environment as inflation remains stubbornly elevated and economic activity begins to weaken. Some analysts have said that when faced with a stagflationary environment, the U.S. central bank will likely ignore elevated inflation and focus on supporting the economy, which would be a positive environment for gold.
The report also noted mixed consumption data as consumers dip further into their savings and credit. The report said that personal income increased 0.3% last month, in line with expectations and down from the 0.5% reported in March.
At the same time, personal spending increased 0.2%, lower than the 0.3% expected by economists and well below the previous month’s 0.8% rise.
