Gold Prices Remain At 5-Week Low Following Rise In PCE Inflation
(Kitco News)- Gold pricescontinue to trade near a 5-week low as inflation pressures rise in line withexpectations, according to the latest data from the U.S. Commerce Department.
Monday, theCommerce Department said that its Personal Consumption Expenditures Indexincreased to 2.0% annually in March, up from the 1.7% increase reported inFebruary.
At the sametime core PCE, which strips out volatile food and energy prices and is the Federal Reserve's preferred inflation measure showed anannual increase of 1.9%, up from February's reading of 1.6%. The data was inline with economists' expectations.
Gold pricesare ignoring the inflation data and according to analysts, reacting to astronger U.S. dollar and easing geopolitical tensions, reduced the yellow metal'ssafe-haven appeal. June gold futures last traded at $1,314 an ounce, down 0.71%on the day.
Along withinflation data, the report also said that personal spending rose 0.4% in March,up from a 0.2% rise in February. The data was in line with expectations.
However, consumerscontinue to spend more than they make as income only rose 0.3% last month, downfrom February’s 0.4% rise. Economists were expecting to see another 0.4% rise.
Katherine Judge, senior economist at CIBC World Markets, said thatthe relatively in-line data will have little impact on interest rateexpectations. Markets are pricing in the possibility of three more rate hikesthis year.
Judge said that the data “Confirms that consumptiongained momentum towards the end of the quarter, however, the slightly softerincome numbers may dampen expectations a little for Q2 consumer spending.
“We still think thattax cuts will lead to a pickup in consumer spending over the remainder of theyear,” she added.
Looking ahead, Michael Pearce, senior U.S. economist at Capital Economics said that they see the potential for core PCE to rise above 2% later in the year. He added that this could end up prompting the Fed to raise rates four times this year.
"As the weaker dollar feeds through to stronger imported goods prices and wage pressures continue to build, we think core inflation will rise above the Fed's 2% target later this year and trend gradually higher from there," he said.
By Neils ChristensenFor Kitco News
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