(Kitco News) - The gold market is seeing some renewed selling pressure, trading near session lows as U.S. inflation pressures continue to moderate, in line with expectations.
The Consumer Price Index (CPI) rose 0.2% last month after August’s 0.2% increase, the U.S. Bureau of Labor Statistics said on Wednesday. The latest inflation data was in line with expectations.
The report said that in the last 12 months, consumer prices sharply moderated, rising 2.5%, down from August’s reading of 2.9%. Economists were expecting to see a 2.6% increase.
However, stripping out volatile food and energy prices, inflation ticked slightly higher than expected, with core CPI rising 0.3% in September. According to consensus estimates, economists were looking for a 0.2% increase.
Annual core inflation rose 3.2%, in line with expectations.
The gold market is seeing some renewed selling pressure in its initial reaction to the inflation data. December gold futures last traded at $2,536 an ounce, down 0.28% on the day.
According to some market analysts and economists, moderating inflation pressures means the Federal Reserve does not have to aggressively ease interest rates, and expectations for a 50-basis point cut next week continue to drop.
"Overall, inflation appears to have been successfully tamed but, with housing inflation still refusing to moderate as quickly as hoped, it hasn’t been completely vanquished. Under those circumstances, we expect the Fed to take a measured approach to cutting interest rates," said Paul Ashworth, Chief North America Economist at Capital Economics.
Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, wrote in a note that the Fed now has a “green light” to cut by 25 basis points next week.
“It’s possible that some will be disappointed that there wasn’t a lower-than-expected inflation reading, which might have given the Fed more room to cut 50 bps, but most of the Fed speakers have already telegraphed their desire to start slowly and not begin with a jumbo cut,” he said.
