Investing.com - Gold prices were higher in North American trade on Wednesday, holding on to solid overnight gains after data showed that core PCE prices rose in line with market expectations in May.
In a report, the Commerce Department said that the core PCE price index inched up 0.2% last month, matching expectations. On an annualized basis, core PCE prices rose 1.6%, in line with forecasts.
The Federal Reserve uses core PCE as a tool to help determine whether to raise or lower interest rates, with the aim of keeping inflation at a rate of 2% or below.
The report also showed that personal spending increased by 0.4% last month, while personal income advanced 0.2%.
Gold for August delivery on the Comex division of the New York Mercantile Exchange tacked on $5.45, or 0.41%, to trade at $1,323.25 a troy ounce by 12:45GMT, or 8:45AM ET.
Futures markets are now reflecting a chance that the Fed could actually cut interest rates before the end of the year, instead of hiking them, in the aftermath of Britain’s shock vote to leave the EU.
According to the CME Fed Watch tool, there’s currently a 0% probability of a Fed rate hike in July and a 5% probability of a rate cut. Odds for a September rate cut stood at 10.5%.
In the first of Fed policymakers to comment since the shock vote in Britain last week, Governor Jerome Powell said on Tuesday that the Brexit referendum had shifted global risks "to the downside," potentially posing a new threat to the U.S. central bank's outlook.
Prices of the yellow metal surged to a 27-month peak of $1,362.60 last Friday, after a shock U.K. vote to exit the European Union sent investors flooding into bullion and other safe haven assets.
The news raised concerns that other countries might leave the union and that global growth would come under significant pressure, while the actual timeframe of the U.K. departure from the EU remained unclear.
Outgoing U.K. Prime Minister David Cameron met with the European Council Tuesday but refrained from invoking Article 50, the treaty measure that would jump start the two year deadline for the U.K. to leave the European Union.
The heads of the EU's 27 other member states will continue their meeting on Wednesday without the U.K. present.
The precious metal is up almost 25% for the year to date, boosted by concerns over global growth and as market players pushed back expectations for the next U.S. rate hike.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.3% at 95.89, moving further away from a three-month high of 96.86 hit earlier in the week.
Elsewhere on the Comex, silver futures for September delivery jumped 51.8 cents, or 2.9%, to trade at $18.40 a troy ounce during morning hours in New York, while copper futures shed 0.2 cents, or 0.11%, to $2.173 a pound.