Gold prices have posted gains in Friday’s North American session. Currently, the spot price for an ounce of gold is $1300.97, up 0.57% on the day. On the release front, CPI gained 0.5%, short of the estimate of 0.6%. Core CPI posted a small gain of 0.1%, shy of the forecast of 0.2%. Retail sales data was a mix, as Core Retail Sales gained 1.0%, above the estimate of 0.9%. However, retail sales were up 1.6%, short of the forecast of 1.7%. Later in the day, we’ll get a look at UoM Consumer Confidence, which is expected to improve to edge lower to 95.1 points.
A strong US economy hasn’t led to higher inflation, and there was some disappointment in the markets as CPI and Core CPI narrowly missed their estimates. This has pushed gold prices higher in the North American session. Gold has climbed above the symbolic $1300 level for the first time since September 26, taking advantage of the negative market sentiment. With inflation an important consideration in future rate decisions by the Federal Reserve, investors will be anxiously monitoring how Fed policymakers respond to September’s soft inflation numbers.
The markets remain very optimistic that a December rate hike is on the way, and this sentiment hasn’t changed after the release of the Federal Reserve minutes earlier this week. The minutes indicated that many policymakers felt that a December hike "was likely to be warranted". However, some policymakers remain concerned about low inflation levels and said that inflation would be a consideration in their decision on a rate hike. The odds of a December hike have increased dramatically in the past few weeks, mostly in response to Fed Chair Yellen and other FOMC members expressing optimism that inflation will move upwards. On Wednesday, Kansas City Fed President Esther George went event further, saying that low inflation did not pose a problem, as the US economy was strong and the labor market was at full capacity. Currently, fed futures have priced in a December hike at 87 percent.
