Friday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.3% in April, after a 0.4% rise in March. The data were weaker than expected with consensus forecasts calling for a 0.4% rise. For the year inflation pressures rose 2%..
Stripping out volatile food and energy prices, core inflation rose slightly less than expected, increasing 0.1% in April. Economists were expecting to see a 0.2% rise. For the year core inflation pressures remain muted, rising 2.1%, rising slighty from March’s reading of 2.0
Gold prices have jumped modestly higher in initial reaction to the disappointing inflation data but has been unable to break initial resistance at $1,290 an ounce. June gold futures last traded at $1,288.10 an ounce up 0.23% on the day.
Some commodity analysts have noted that gold price should do well in a low inflation environment because it will keep the Federal Reserve from aggressively raising interest rates.
Gasoline prices continued to be a significant factor in headline inflation data. The report said that the gasoline index rose 5.7% last month, “accounting for over two-thirds of the seasonally adjusted all items monthly increase.”
Overall the energy index rose 2.9% last month. Looking at food prices, the report said that food costs fell in April for the first decline since June 2017.
Avery Shenfeld, senior economist at CIBC Capital Markets, said that the miss in inflation could prompt comments from some of the dovish members of the Federal Reserve; however, he added that the data is unlikely to shift the current neutral monetary policy stance.
“The majority on the Fed will still in our view be content with a stand pat stance, focussed on growth and labour market tightness as reasons to expect inflation to nudge higher again,” he said. “Little market reaction likely to the small miss vs. expectations.”
The SPDR Gold Shares (GLD) was trading at $121.52 per share on Friday afternoon, up $0.32 (+0.26%). Year-to-date, GLD has declined -1.72%, versus a 7.31% rise in the benchmark S&P 500 index during the same period.
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