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Gold Prices Push Into Positive Territory After In-Line Rise In U.S. CPI

Neils Christensen  

(Kitco News) - Gold prices have turned positive on the day as markets digest a steady increase in U.S. inflation pressures.

Tuesday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.2% in February, after increasing 0.5% in January. The increase was stronger than expected as consensus forecasts were calling for a 0.2% increase.

For the year, headline inflation increased 2.2%, the report said.

"The indexes for shelter, apparel, and motor vehicle insurance all rose and contributed to the 1-month seasonally adjusted increase in the all items index," the report said.

Monthly core inflation, which strips out volatile food and energy costs, rose 0.2%, following a 0.3% increase in January. Economists were expecting to see a 0.2% rise in price pressures.

Annually, core inflation rose 1.8%. While not the Federal Reserve's preferred inflation measure, the data shows that price pressures are slowly moving towards the central bank's 2% target.

Gold prices were under modest selling pressure ahead of data and have moved into slight positive territory in initial reaction. April gold futures last traded at $1,322.8 an ounce, up 0.15% on the day.

Gold prices have struggled to find momentum as markets prepare for next week’s Federal Reserve monetary policy meeting. The central bank is widely expected to raise interest rates 25 basis points. However, markets are anxious to see how aggressive the bank will be on further rate hikes through the year.

Avery Shenfeld, senior economist at CIBC World Markets, said that while headline inflation is expected to rise, he is not expecting to see the Federal Reserve to aggressively raise interest rates this year.

“Tame core goods prices continue to keep inflation at bay, a reflection of the remaining global economic slack offsetting a tightening US economy,” he said. “With core PCE prices still comfortably below target, the Fed has no reason to get any more aggressive on rate hikes than its current dot-plot foreacst already builds in.”

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