(Kitco News) - Gold prices continue to hold above critical support above $1,400 an ounce and seeing little reaction to muted inflation pressures.

Friday, the Department of Commerce said that its Core Personal Consumption Expenditures Index, increased in May, 0.2% in line with expectations. Annually, core inflation, which is the Fed's preferred inflation measure increased 1.6%, unchanged from April’s reading. However the inflation was better than expected as consensus forecasts were calling for an increase of 1.5%.

Gold prices were showing modest gains ahead of the report but has seen little movement in initial reaction to the data. August gold futures last traded at $1,417.60 an ounce, up 0.38% on the day.

According to some economists the unchanged inflation data will provide some support for the Federal Reserve to cut interest rates as early as next month.

Looking past inflation data, the economic data was better than expected, according to some economists. The report said that personal spending increased 0.4% last month, compared to April's increase of 0.6%. However, the data missed expectations; consensus forecasts were calling for a 0.5% increase.

Although consumers aren't spending a lot, they are seeing a bigger paycheck. The report said that personal income rose 0.5% in May, following a 0.5% rise in April. The data beat expectations as economists forecasted a rise of 0.3%.

Katherine Judge, senior economist at CIBC World Markets described the latest report as “a solid picture of the American consumer.”

“Overall, the encouraging consumer spending figures and the better than expected core PCE print suggest that the market is expecting too much in terms of the magnitude of Fed easing over the year,” she said.

Judge added that that the data could push bond yields higher into the weekend, which would support the U.S. dollar and in turn weigh on gold.