Gold Prices See Brief Pop Following Disappointing US Inflation Data

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Oil prices were in flux and gave up earlier gains as investors took profit on a rally triggered by the potential disruption to crude flows from major exporter Iran in the face of US sanctions.

The U.S. Labor Department said its Consumer Price Index rose 0.2 percent last month, less than forecasts for 0.3 percent, as a moderation in healthcare prices offset increases in the cost of gasoline and rental accommodations.

Excluding the volatile food and energy components, the CPI edged up 0.1 per cent after two straight monthly increases of 0.2 per cent.

The Producer Price Index, which measures costs for goods at the factory gate, rose 0.1 percent in April after the final demand prices rose 0.3 percent in March and 0.2 percent in February. The increase was weaker than expected as consensus forecasts were calling for a 0.3% rise.

Last week after its monetary policy meeting the Federal Reserve suggested that it was comfortable with inflation rising above its 2% target.

Food prices also rose, as did medical services, but cell phone services - which had been blamed for the bafflingly low inflation past year - were flat after finally rising in March. And expected increases in gasoline prices this summer will add to the inflation pressures.

Further increases are likely after crude oil prices jumped to three-and-a-half-year highs on Wednesday in the wake of US President Donald Trump's decision to pull the US out of an global nuclear deal with Iran.

Ramaphosa unhappy with Trump's decision to pull out of Iran nuclear deal
How that works is less than clear. "This decision endangers not only the Iranian nuclear deal, but also worldwide legality". But now that the United States is out of the deal, the stars may be aligning to keep another deal from replacing it.

Food prices also rose 0.3 percent in the month. Food prices gained 0.3%, the highest increase in this category since March 2017.

For April, food costs fell 1.1 percent in April, the biggest decline since a 1.3 percent fall in August 2016. A separate report released May 10 by the Labor Department showed average hourly earnings adjusted for inflation rose 0.2% from April 2017.

US consumer prices rose less than expected in April, suggesting that inflation was increasing at a moderate pace, which could allow the Federal Reserve to continue gradually raising interest rates.

The cost of recreation fell 0.4 per cent last month, the biggest decline since December 2009. The cost of motor vehicle insurance fell for the first time in a year.

The labour market is considered to be near or at full employment, leading to a slowdown in job growth as employers struggle to find skilled workers.

Hiring slowed in March and April after surging in February.

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