Gold prices push to $1,675 as U.S. core PCE rises 0.6% in August

Hotter-than-expected inflation data is providing some initial support for the gold market as prices retest the long-term support/resistance level at $1,675 an ounce.

Friday, U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.6% last month, up from July’s reading of 0.1%. Economists were expecting to see a 0.5% rise.

According to some economists, the rise in core inflation is an indication that rising consumer prices are becoming entrenched in the economy, which will provide further challenges for the Federal Reserve.

The gold market has seen a modest jump in initial reaction to the latest inflation data. December gold futures last traded at $1,675.70 an ounce, up 0.44% on the day.

The latest economic report also noted that consumers are once again spending more than they are earnings. Personal income in August rose 0.3%, in line with expectations; meanwhile, personal spending rose 0.4%. The data beat expectations as economists were forecasting a 0.2% increase.

According to some economists, consumes are being forced to spending more because of inflation.

Gold hasn’t been much of an inflation hedge through 2022 as higher consumer prices have forced the Federal Reserve to aggressive raise interest rates, which has pushed real yields into positive territory. However, some analysts have said that sentiment in the gold market could slowly be changing as the Fed’s monetary policy could be close to a breaking point

Massive volatility in global currency markets this week as been a signal for many investors that the surging momentum in the U.S. dollar, driven by the rising Fed Funds rate is causing problems for the global economy.

By Neils Christensen

For Kitco News

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