Gold prices testing support around $1,650 as U.S. PCE rises 0.6% in September, in line with expectations

Nhe gold market is testing critical support around $1,650 an ounce as U.S. inflation pressure rise in line with expectations.

Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.5% last month, up from August's increase of 0.6%. The data was in line with expectations.

For the year, core inflation rose 5.1%, up from August's annual increase of 4.9%. Inflation was a tick lower as economists were expecting to see a 5.2% increase.

The data is adding some selling pressure to gold as it was already testing critical support levels. December gold futures last traded at $1,653.70 an ounce, down 0.71% on the day.

According to some economists, although inflation is not heating up more than expected, it is still persistently high and will force the Fed to aggressively raise interest rates. The CME FedWatch Tool shows markets see an 84% chance of a 75-basis point hike next week. Expectations are roughly 50/50 regarding a 50 or 75-basis-point move in December.

"Inflation costs remain high. There is still work to be done and the data, although steady month-on-month/quarter on quarter, is still elevated well above what the Fed would like it to be," said Greg Michalowski, currency analyst at Forexlive.com.

The report also noted that personal income also rose in line with expectations, increasing 0.4% in September, compared to August's 0.3% rise.

 

Although income isn't growing, consumers continue to spend, with personal spending increasing 0.6%, beating expectations. According to consensus forecasts, economists were looking for a 0.4% rise.

By Neils Christensen

For Kitco News

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