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Gold prices have pushed back above the critical psychologically important $1,950 level as U.S. inflation drops in line with expectations.
Friday, the U.S. Department of Commerce said its core Personal Consumption Expenditures price index increased 0.2% last month, compared to May's increase of 0.3%. The inflation rose in line with economists' expectations.
Inflation in the last 12 months rose 4.1%, down sharply from June's 4.6% increase. Annual inflation also came in a tick cooler than expected, with economists looking for a 4.2% rise. Looking at the broader trend, inflation remains stubbornly high, roughly double the Federal Reserve's target of 2%.
Meanwhile, headline inflation for the last 12 months rose 3.0%, compared to May's increase of 3.8%.
Although inflation remains stubbornly high, some analysts have noted that it continues to fall in the right direction, giving the Federal Reserve room to leave interest rates unchanged in September. A potential halt to the central bank's tightening continues to support gold prices.
August gold futures last traded at $1,955.90 an ounce, up 0.55% on the day.
Analysts note that growing cracks in consumption also support gold prices. The report noted that personal income is not keeping up with consumption.
Personal income increased 0.3% in June, compared to May's revised increase of 0.5%. The data missed expectations as economists looked for a 0.5% increase.
Meanwhile, consumers appear to be dipping into their credit to meet their shopping needs. The report said that consumption increased by 0.5% last month, compared to May's increase of 0.2%. Spending came in higher than expected, with consensus estimates calling for a 0.4% increase.
By
Neils Christensen
For Kitco News
