(Kitco News) - The gold market continues to see solid bullish momentum, with prices trading above $2,800 an ounce as U.S. inflation data remains stubbornly elevated, in line with expectations.
The Core Personal Consumption Expenditures (PCE) index, which excludes volatile goods and energy prices and is the Federal Reserve’s preferred inflation gauge, increased by 0.2% last month, compared to November’s rise of 0.1%, the U.S. Department of Commerce reported Friday. Consumer prices rose in line with consensus estimates.
Over the past 12 months, core inflation rose 2.8%, unchanged from November’s reading.
Meanwhile, headline PCE increased by 0.3% last month and 2.6% for the year.
The gold market is not seeing much reaction to the latest inflation data, continuing to trade with solid bullish momentum. Spot gold last traded at $2,804 an ounce, up 0.31% on the day.
Analysts note that the latest inflation data presents a mixed picture for gold. Elevated consumer prices will likely prevent the Federal Reserve from cutting interest rates anytime soon. However, the fact that inflation remains unchecked poses a threat to the economy, reinforcing gold’s safe-haven appeal.
Analysts also point out that higher inflation and interest rates could pose a greater risk to already volatile equity markets, adding another supportive factor for gold.
The report also highlighted robust consumption growth, with personal spending increasing by 0.7%, up from November’s rise of 0.4%. The data exceeded expectations, as economists had forecast a 0.5% increase.
However, consumers continue to rely on debt and savings, as personal income rose 0.4%, in line with expectations.
The latest consumption data is likely to support expectations that the Federal Reserve will keep interest rates unchanged for the foreseeable future. On Wednesday, Federal Reserve Chair Jerome Powell stated that the central bank is in no hurry to cut rates this year, given that inflation remains elevated and the labor market remains healthy.
