Gold prices holding above $1,750 as core PCE inflation rises 4.8% in June

The gold market is holding on to solid gains has inflation pressures continue to rise more than expected.

On a monthly basis, the core Personal Consumption Expenditures price index increased 0.6% last month, the U.S. Department of Commerce said on Friday. The inflation data was hotter than expected as consensus forecasts were calling for a 0.5% rise.

On an annual basis, core PCE increased 4.8%, up from last month’s reading at 4.7%.

The core inflation strips out volatile food and energy prices and is the U.S. central bank's preferred inflation measure.

Meanwhile, headline inflation also rose more than expected, increasing 1.0%, up from May’s increase of 0.6%. For the year inflation jumped to 6.8%, up from May’s reading of 6.3%. Inflation continues to hold near its highest level in 40 years.

The gold market is not seeing much reaction to the latest inflation data as it holds most of its recent gains above $1,750 an ounce. August gold futures last traded at $1,755.60 an ounce, up 0.30% on the day.

Analysts have said that the latest inflation data is a doubled edged sword for the gold market. The latest data shows that inflation remains persistently high; however, it could force the Federal Reserve to continue to aggressively raise interest rates longer than markets currently expect.

However, some analysts note that with two months before the next Federal Reserve monetary policy meeting, gold has room to move higher as expectations remain that inflation will start to cool, giving the central bank room to slow the pace of its rate hikes through the end of the year.

Along with the stronger than expected inflation data. The report also showed that solid consumption and income growth.

Consumer spending last month increased 1.1%, up from 0.2% in May. Economists were expecting to see a 0.9% increase.

At the same time, income rose 0.6%, up from 0.5% in May. Consensus forecasts called for a 0.5% increase.

By Neils Christensen

For Kitco News

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