(Kitco News) - The gold market is experiencing some technical selling pressure, largely ignoring the Federal Reserve’s preferred inflation gauge, which shows that consumer prices remain stubbornly elevated.
The U.S. Department of Commerce reported Thursday that its core Personal Consumption Expenditures (PCE) index increased by 0.3% last month, compared to August’s increase of 0.1%. The data rose in line with expectations.
On an annual basis, core PCE rose 2.7% and has remained unchanged over the last three months.
However, headline inflation for the year rose by 2.1%, down from September’s increase of 2.3%.
The gold market is not reacting significantly to the latest inflation data, as some investors are taking profits after Wednesday’s rally to record highs above $2,800 an ounce. December gold futures last traded at $2,786.80 an ounce, down 0.50% on the day.
Although elevated inflation remains embedded in the broader economy, analysts have noted that they don’t expect it to impact the Federal Reserve’s easing cycle.
“For financial markets, the figures are unlikely to be a game-changer, with participants for now squarely focused on next Tuesday's presidential election, even if the nuisance of the October jobs report looms on tomorrow's data docket,” said Michael Brown, Senior Research Strategist at Pepperstone.
Many economists have pointed out that falling energy costs, which aren’t part of the core calculations, are providing significant relief for consumers, thereby supporting consumption.
Strong consumer spending should continue to support economic activity through the end of the year.
The report indicated that personal spending increased by 0.5% last month, up from August's 0.2% increase. This beat expectations, as economists had projected a 0.4% increase.
However, while consumption remains robust, wages are not keeping pace. The report stated that personal income increased by 0.3% last month, following August’s 0.3% increase, which met expectations.
