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Gold Prices Holding Gains Following Muted Inflation Data

Gold prices are holding on to solid gains even as inflation pressures continue to remain relative muted.

Tuesday, the Department of Commerce said that its Core Personal Consumption Expenditures Index, increased in June, 0.2% in line with expectations. Annually, core inflation, which is the Fed's preferred inflation measure increased 1.6%, unchanged from May’s reading. This is the third month inflation has held at this level.

Gold prices were showing modest gains ahead of the report, but has seen little movement in initial reaction to the data. August gold futures last traded at $1,429.90 an ounce, up 0.67% on the day. The gold market continues to benefit from expectations of aggressive monetary policy easing, which could be announced tomorrow.

Some economists note that tame inflation pressures will prompt the Federal Reserve to cut rates by 25 basis points.

“There are no big surprises here but the misses on year-over-year core and headline inflation will firm up some views at the FOMC that something needs to be done to boost inflation expectations,” said Adam Button, managing director of

Outside of the inflation pressures, the report showed that consumers are starting to save a little bit more of their paychecks. The report said that personal income rose 0.4% last month, compared to May’s 0.5% increase. The data was in line with expectation.

Meanwhile, the report said that personal spending increased 0.3% last month, in line with expectations and following a revised 0.5% rise in May.

According to some economists the latest data shows that the U.S. consumer remains healthy and a critical component of economic growth.