Gold Prices Down Following Rise In U.S. CPI
(Kitco News)- Gold prices have fallen from their four-month highsfollowing stronger-than-expected U.S. inflation data.
Friday,the U.S. Consumer Price Index rose 0.1% in December, after increasing 0.4% in November,the U.S. Labor Department said. According to consensus forecasts, economistswere expecting to see an increase of 0.1%.
However,monthly core inflation, which strips out volatile food and energy costs, rose0.3%, following a 0.1% advance in November. Economists were expecting to see a0.2% rise in price pressures.
As of 8:32 a.m. EST, Comex February gold was up $5.40 to $1,327.90 an ouncean ounce. Two minutes prior to the report, the metal was up $9.60 to $1,332.10an ounce.
Annually,the report said, headline inflation rose 2.1%, slightly down from November’s readingof 2.2%.
Despitethe stronger than expected monthly core increase, annual inflation remainsrelatively muted, increasing 1.8% in December, up from 1.7% in November.
“The 12-month change has now been either 1.7 or 1.8 percent for eight consecutive months,” the report said.
Core inflation, while not the Federal Reserve’s preferred inflation measure is still well below the central bank’s target of 2%.
Looking at some of the components, the report said that foodindex increased 1.6% in 2017, while energy index increased 6.9%.
Avery Shenfeld, senior economist at CIBC World Markets, saidthat the U.S. dollar could see some momentum Friday following CPI data. Headded that while the strong rise in core inflation is not a trend, it appearsprice pressures are heading in the right direction.
Inflation has been in the spotlight lately as the Federal Reserve has shown ongoing concern for weak inflation pressures. Some central bank committee members have said that interest rates should be put on hold until inflation picks up.
According to some economists, the latest rise in core inflation provides some incentive to raise interest rates.
"The 0.3% m/m gain in core consumer prices in December will reinforce expectations of a Fed rate hike in March and supports our view that the Fed will ultimately increase interest rates by a more aggressive 100bp cumulatively this year," said Paul Ashworth, chief U.S. economist at Capital Economics.
By Neils ChristensenFor Kitco News
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