Gold futures rose Tuesday to notch their highest settlement in nearly eight weeks as lackluster economic data raised questions about whether the Federal Reserve will follow through with another rate increase this year.

December gold GCZ7, -0.16% which has become the most active contract, rose $6, or 0.5%, to settle at $1,279.40 an ounce, its highest settlement since June 8. Cash gold had gained about $75, or 6.2%, since rebounding from a near four-month low of $1,204.45 on July 10.

Gold reversed losses from earlier in the session as a report showed consumer spending rose just 0.1% in June, matching the smallest increase of 2017. The result was in line with the consensus produced by a MarketWatch survey of forecasters. A closely watched snapshot of core inflation within the report, the Federal Reserve’s favorite inflation gauge, edged up a tepid 0.1% that month.

Later, the Institute for Supply Management’s July manufacturing activity index fell slightly to 56.3%, but still signaled healthy growth in the sector.

Because of recent signs of softer inflation, market observers have cut back their expectations for Fed rate increases. A slower pace of rate increases can be supportive for precious metals’ prices.

“I think the psychology developing over the past several months is that the Fed is expected to be more hawkish and aggressive, but I don’t believe that’s going to come to fruition,” said Peter Hug, global trading director at Kitco Metals, in an interview.

Hug doesn’t see the economy as being strong enough to support another rate increase this year or for an aggressive reduction of the Fed’s $4.5 trillion balance sheet, which can also serve to tighten monetary policy.

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