(Kitco News) - The gold market continues to hold new support above $4,600 an ounce and has room to move higher as elevated inflation is not a big enough threat to stop the Federal Reserve from cutting interest rates through the new year.
The Consumer Price Index (CPI) rose by 0.3% in December, following a 0.3% increase in November, the U.S. Bureau of Labor Statistics announced on Tuesday. The inflation numbers were in line with economists’ expectations.
Over the past 12 months, headline inflation climbed 2.7%, unchanged from November. Annual inflation also rose in line with expectations.
Core CPI, which excludes volatile food and energy prices, increased by 0.2% last month —cooler than expected. Economists had forecast a 0.3% rise in core consumer prices, according to consensus estimates.
Annual core CPI rose 2.6%, down from November’s 12-month reading of 2.7%. Although embedded inflation pressures have fallen, they still remain above the Federal Reserve’s target of 2%.
However, economists have said that although inflation remains sticky, it is not accelerating and should give the Federal Reserve room to ease interest rates as the labor market continues to cool.
The gold market is not seeing any major reaction to the latest inflation data. Spot gold last traded at $4,611.70 an ounce, up 0.30% on the day.
Although markets are looking for the Federal Reserve to cut interest rates through 2026, it is unlikely they will do so this month. Markets see a 95% chance that the central bank will leave interest rates unchanged on Jan. 28.
