(Kitco News) – The gold market remains under significant pressure and is unable to catch a bid as inflation pressures rise in line with expectations.
On a monthly basis, the core Personal Consumption Expenditures index was up 0.5% last month, the U.S. Department of Commerce said Friday.
On an annual basis, core PCE jumped 4.9%, up from last month’s reading at 4.7%. Annual inflation came in slightly hotter than expected as consensus forecasts called for an increase of 4.8%.
Similar to the Consumer Price Index, the PCE is at its highest level in nearly 40 years.
The core inflation strips out volatile food and energy prices and is the U.S. central bank’s preferred inflation measure.
The gold market has been able to find any bullish traction seeing strong selling pressure in the last three days. February gold futures last traded at $1,786.1an ounce, down 0.41% on the day.
Along with hotter than expected annual inflation, the report also noted weak growth in personal income last month. The report said that personal income increased 0.3%; according to consensus forecasts, economists were expecting to see a 0.5% increase.
Personal consumption fell inline with projections, dropping 0.6% in December.
Although inflation is running hotter than expected, Adam Button, chief currency strategist at Forexlive.com said that the report did hold any major surprises for the U.S. Central bank.
“There’s nothing here that would have spooked [Federal Reserve Chair Jerome] Powell this week,” he said.
Wednesday, the Federal Reserve signaled that it is ready to start raising interest rates “soon.” And Powell said at a press conference that the economy is strong enough to withstand interest rate hikes.
“There’s quite a bit of room to raise interests without threatening the labor market. This is by so many measures a historically tight labor market — record levels of job openings, quits, wages are moving up at the highest pace they have in decades,” Powell said.
Although the Federal Reserve appears to be pursuing aggressive tightening policies to reign in the rising inflation threat, some economists don’t think it will be able to achieve its goals this year.
“The latest batch of data nearly illustrate the conundrum facing the Fed – with price and wage inflation running at 40-year highs, while at the same time underlying domestic demand growth is weakening,” said Paul Ashworth, chief U.S. economist, at Capital Economics. “To our minds, despite the strength of price and wage inflaton, it is disappointingly weak real economic growth that will prevent the Fed from delivering a full-blown Ratemaggedon this year.”
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