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(Kitco News) – Gold prices are struggling to stay in positive territory, seeing little upward momentum after a stronger-than-expected rise in US consumer prices.
On Wednesday, the US Labor Department said its Consumer Price Index rose 0.3% in April, after rising 1.2% in March. The data beat expectations as economists had expected a 02% rise.
The report stated that the headline inflation rate rose by 8.3% for the year, which was higher than expected. Economists had been looking for the data to show a sharp drop from March’s peak, up 8.1%. Inflation rose in March to 8.5%, the highest level in 40 years.
Meanwhile, the core CPI, which excludes food and energy costs, rose 0.6% last month, up from 0.3% in March. The data was also higher than expected. For the year, core CPI rose 6.2%.
The gold market is not seeing much reaction to the latest inflation data. The market is trying to find some support after falling through $1,850 an ounce on Tuesday, hitting a three-month low. Gold futures for June were last traded at $1,843.20 an ounce, relatively unchanged on the day.
Gold is stuck in neutral after hotter than expected inflation data. US CPI rose 8.3% year over year in April; Economists had expected to see 8.1%. Gold futures for June were last traded at $1,839.50 an ounce, almost unchanged on the day.
According to some analysts, gold is struggling after the CPI data as it supports the Fed’s aggressive plans to tighten interest rates. The US central bank has signed that it may raise interest rates by 50 basis points in the next two meetings.
“Overall, the April data is likely to reinforce the Fed’s intention to continue raising interest rates by 50 basis points in the next two meetings — and could lead to renewed speculation about a 75 basis point hike or a move between meetings,” said Andrew Hunter, chief US economist. . In Capital Economics.
Some economists and market analysts said that recent inflation supports the idea that inflation has peaked; However, the question is just how high will inflation be.
“We are in the process of pulling back from very high annual inflation, but the shape of this curve is in question. Will it be a quick return to a 2% inflation rate or a long and slow process,” Adam Patton said. Chief Currency Strategist at Forexlive.com.
High food and energy prices continue to contribute significantly to higher consumer prices. The food index rose 1% last month, the report said. Looking at energy prices, the report indicated that the gasoline index fell 6.1% in April; However, natural gas prices and electricity costs rose.
For the year, energy prices rose 3.0.3%. At the same time, food prices rose by 9.4%.
Some analysts expect energy prices to continue to drive inflation higher. Average gas prices in the US are currently at record levels.
Catherine Judge, chief economist at CIBC, said that although inflation may have peaked, it could be more steady than expected.
“Looking beyond April, the underlying effects will help annual inflation continue to slow in the near term, but that will be limited by gas prices, which are trending upwards again, and the supply disruption caused by the shutdown in China, along with the tightening in the labor market. and rising housing prices.”
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