Gold price loses some ground following uptick in U.S. CPI inflation

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Wednesday, the U.S. Labor Department said its U.S. Consumer Price Index rose 0.1% in February, after a 0.1% rise in January. The data was slightly better than consensus forecasts, as economists were calling for an unchanged reading.

Annually, headline inflation has increased by 2.3%, down from January’s reading of 2.5%. The report said that rising food and shelter prices compensated for falling energy prices. The all energy index dropped 2% last month.

Stripping out volatile food and energy prices, core inflation rose in line with expectations, increasing 0.2% in last month, following January’s rise of 0.2%. For the year, core inflation is up by 2.4%.

Gold prices have dropped in reaction to the latest inflation data but are still holding on to gains for the day. April gold futures last traded at $1,665.20 an ounce, up 0.30% on the day. However, market analysts and economists note that economic data is not having much impact on market moves as investors remain focused on the spreading coronavirus and the effect it could have on the global economy.

“If you still care about it, U.S. inflation looked a touch firmer than expected in February, but clearly doesn’t stand in the way of further Fed rate cuts,” said Avery Shenfeld, senior economist at CIBC.

Michael Pearce, senior U.S. economist at Capital Economics, said that he is expecting to see a drop in inflation as the global economy struggles to find any traction amidst the spreading coronavirus. He added that he is also expecting the Federal Reserve to continue cutting interest rates.

“With core inflation stable, and headline inflation set to plummet, there is little in the inflation data to distract the Fed from its immediate goal of supporting the economy during the coming coronavirus hit,” he said.
“If you still care about it, US inflation looked a touch firmer than expected in February, but clearly doesn’t stand in the way of further Fed rate cuts,” said Avery Shenfeld, senior economist at CIBC