Gold pricing holding its ground as outdated PCE shows annual inflation holding at 2.8%

In the government’s delayed Personal Expenditure Index data, core PCE index, which excludes volatile food and energy prices and is the Federal Reserve’s preferred inflation gauge, showed consumer prices rising 0.2% in September. Inflation rose roughly in line with economists’ expectations.

For the year, core inflation rose 2.8%.

Analysts note that while inflation remains above the Federal Reserve’s 2% target the latest data shows that consumer prices are not accelerating.

“With the Fed meeting next week the big debate is whether they can cut rates to support the job market with inflation above their target and this morning’s PCE numbers show that inflation is stable, so they will be able to cut interest rates by 25 bps, although there will likely be some discussion – and potential dissent – about inflation remaining sticky and not approaching the 2.0% target any time soon,” said Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management in a note.

Headline PCE inflation rose 0.3% last month, also meeting consensus estimates. For the year, headline inflation also rose 2.8%.

The data is extremely outdated due to the Federal government’s 43-day shutdown.

The gold market continues to hold solid support above $4,200 an ounce as economists have said that slowing momentum in the U.S. labor market outweighs sticky inflation. Spot gold last traded at $4,236.90 an ounce, up 0.71% on the day.

The data has had little impact on U.S. monetary policy forecasts. According to the CME FedWatch Tool, markets are pricing in an 87% chance of a rate cut next week.

While inflation remains relatively stable, the report notes that consumers remain fairly resilient. The report said that personal income rose 0.4% in September, up from August’s increase of 0.4%. Economists were expecting to see a 0.3% increase.

At the same time, personal consumption increased 0.3%, in line with economists’ forecasts.