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Gold prices need to hold support at $2,010 as U.S. CPI hold steady, rising 3.1% in November

The gold market is trying to hold critical support around $2,010 an ounce as inflation pressures remain relatively unchanged from last month and in line with expectations.

Tuesday, the U.S. Labor Department said its Consumer Price Index rose 0.1% last month, following an unchanged reading in October. The data was slightly hotter than expected, as economists looking for another unchanged reading.

The report said inflation in the last 12 months rose 3.1%, down slightly from the 3.2% rise in October. Annual inflation rose in line with expectations.

Meanwhile, core CPI data, which strips out volatile food and energy prices remains elevated even as it rises in line with consensus projections. Core CPI rose 0.3% last month, compared to October’s increase of 0.2%.

For the year, core inflation rose 4.0%, unchanged from October’s increase.

The gold market is not seeing much reaction to the latest inflation data as it continues to see solid selling pressure after an exhaustive rally to an all-time high last week. Analysts have said that if gold is unable to hold support at $2,010 an ounce, they would expect to see another round of selling and profit-taking in the market.

Economists note that the latest inflation data could cause a shift regarding market expectations for a cut as early as March. The Federal Reserve has been clear that it needs to see inflation on a sustainable downward trend before it looks to start easing interest rates.

“The slightly stronger 0.28% m/m rise in core consumer prices in November suggests the Fed may be able to hang onto its tightening bias for a little longer, but sharper declines in inflation are still likely to result in rates being cut aggressively next year,” said Andrew Hunter, deputy chief U.S. economist at Capital Economics.

The inflation data comes ahead of the Federal Reserve’s last monetary policy meeting of 2023. The market is expecting the U.S. central bank to maintain interest rates on Wednesday; however, markets will be paying close attention to updated economic projections. In September, the Federal Reserve signaled the potential for two rate hikes.

Source: kitco