(Kitco News) - The gold market continues to experience some modest technical selling pressure as investors take profits ahead of the weekend, prompted by muted inflation data.
The Commerce Department's core personal consumption expenditures (PCE) price index, which excludes volatile food and energy prices, nudged up 0.2% in July, as expected.
For the year, the Federal Reserve’s preferred inflation gauge increased by 2.6%, a level that has held steady for the last three months. Annual inflation came in slightly weaker than expected, with economists forecasting a 2.7% increase.
Headline PCE inflation also moved in line with expectations, rising 0.2% last month. For the year, inflation rose by 2.5%, unchanged from June’s reading.
The gold market is experiencing a slight increase in selling pressure in its initial reaction to the inflation data. December gold futures last traded at $2,552.70 an ounce, down 0.30% on the day.
Economists note that the latest inflation data provides the Federal Reserve with a “green light” to start a new rate-cutting cycle next month. The question remains: how aggressive will the easing be?
Markets have fully priced in a 25-basis-point move following the September monetary policy meeting, and there is a 30.5% chance of a 50-basis-point move.
“The probability of 50 basis points is at 30%, which is a tad lower than yesterday but will hinge on next Friday's non-farm payrolls report,” said Adam Button, Head of Currency Strategy at Forexlive.com.
Some analysts have noted that Thursday's updated GDP data, which showed the economy growing by 3% in the second quarter, beating expectations, is a sign that the Federal Reserve doesn’t need to be aggressive in its rate cuts.
Along with relatively muted inflation, the latest economic report also showed consumption holding steady as U.S. consumers continue to experience income growth.
The report indicated that personal income increased by 0.3% last month, up from 0.2% in June. The data was slightly stronger than expected, as consensus forecasts had predicted a 0.2% increase.
However, consumers are spending more than they are making, as personal consumption increased by 0.5% last month, rising in line with expectations.
