Gold Prices See Brief Pop Following Disappointing U.S. Inflation Data
(Kitco News)- Gold prices have pushed to near session highs as U.S.inflation pressures remain muted.
Thursday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.2%in April, after decreasing 0.1% in March. The increase was weaker than expectedas consensus forecasts were calling for a 0.3% rise.
Forthe year, the report said that annual headline inflation increased 2.5%, drivenmostly by higher gasoline prices and rental costs.
Monthlycore inflation, which strips out volatile food and energy costs, rose 0.1%,following a 0.2% increase in March. Economists were expecting to see a 0.2%rise in price pressures. Annually, core inflation increased 2.1%,slightly above the Federal Reserve's 2% target.
Goldprices were modestly positive ahead of the data and have jumped slightly higherin initial report in initial reaction. June gold futures last traded at$1,321.30 an ounce, up 0.62% on the day.
Accordingto some commodity analysts, the inflation data is positive for gold because itshows that price pressures are moving up but not at a pace that warrantsaggressive action from the U.S. central bank.
Lastweek after its monetary policy meeting the Federal Reserve suggested that itwas comfortable with inflation rising above its 2% target. In its statement thecentral bank said that it sees inflation running near its “symmetric2 percent objective over the medium term.”
Analystshave noted that rising inflation in a low interest rate environment is positivefor the gold market as real interest rates will remain low.
Royce Mendes, senior economist at CIBC World Markets said that he expects the latest inflation data to weigh on a surging U.S. dollar, which should provide some near-term support for gold. He added that if economic growth remains strongthe U.S. central bank is on target to raise interest rates in June, despite the weak inflation data,.
"But this does further tilt the odds in favourof two more rate hikes this year rather than the three some Fed officials havebeen suggesting," he said.
By Neils ChristensenFor Kitco News
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