(Kitco News) - The gold market is holding on to its early morning gains up nearly 2% even as inflation pressures remain muted.
Friday, the Department of Commerce said that its Core Personal Consumption Expenditures Index, increased 0.3% in July, up from June’s 0.2%; however the data missed expectations. According to consensus forecasts, economists were expecting to see an increase of 0.5%.
Annual core inflation rose 1.3%, up from June’s reading of 1.1%.
Gold prices were showing strong gains ahead of the report and have pushed slightly higher in initial reaction. December gold futures last traded at $1,968.70 an ounce, up 1.82%.
While at first glance the weak inflation data would be negative for gold, some analysts have said that this could also be seen as supportive. Weak inflation pressures mean that the Federal Reserve has room to continue its aggressively dovish monetary policy action.
The latest inflation data comes a day after Federal Reserve Chair Jerome Powell announced a shift in the central bank’s monetary policy outlook. In a speech during the annual Jackson Hole central bank summit, he said that the Federal Reserve will target average 2% inflation and put emphasis on 'broad and inclusive' employment.
While inflation remained muted, the report also showed improving economic conditions. The report said that personal consumption rose 1.9% last month, following June’s 5.6% increase. Economists were expecting personal spending to rise 1.5%.
Looking at personal income, the report said that it rose 0.4%, up from June’s negative 1.1% reading. The data was much better than expected as economists were looking for a -0.3% drop in personal income.
“The income and spending numbers are a great sign for spending going forward,” said Adam Button, chief currency strategist at Forexlive.com.
Although U.S. consumption data were better than expected, economists at CIBC said that economic activity still has a lot of ground to make up after the devisating impact of the COVID-19 pandemic.
“Total consumer spending remains almost 5% below February levels,” the said. “Whether goods spending can remain so strong will depend in large part on continued income support for those persons still out of work.”
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August 28, 2020 at 07:36PM
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Gold price holding steady following weak PCE inflation data - Kitco NEWS
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