Gold Edges Up As PPI Misses Expectations In August
(Kitco News) - Gold prices ticked up as producer inflation pressure in the U.S. came in below expectations in August.
Producer Price Index (PPI) declined 0.1% in August following a rise of 0.1% in July, the U.S. Labor Department said on Wednesday. According to consensus forecasts, economists were expecting an increase of 0.2%.
This marked PPI’s first decline in one-and-a-half years.
The annual PPI also missed market’s consensus, coming in at 2.8% versus the expected 3.2%.
Core inflation, which strips out volatile food and energy prices was down 0.1% in August, following an advance of 0.1% in July. Annual core inflation came in at 2.3%, falling short of market consensus forecasts of 2.7%.
Immediately after the release, gold edged up slightly, with December Comex gold futures last trading at $1,200.00 an ounce, down 0.18% on the day. Prior to the release, gold prices were trading below the $1,200.00 level amid little risk aversion in the marketplace this week, according to Kitco’s senior technical analyst Jim Wyckoff.
“First resistance is seen at this week’s high of $1,204.80 and then at $1,209.00. First support is seen at this week’s low of $1,192.70 and then at $1,189.50,” Wyckoff said in his AM Roundup.
This report is one of the most significant ones scheduled for release in the U.S. this week, with the consumer price index due out Friday morning.
Market participants pay close attention to the PPI as a gauge for inflation at the wholesale level. It is seen as a leading indicator because traditionally producers pass on higher prices to their customers.
The Fed is also constantly keeping a close eye on inflation pressures, especially when making its decision to raise rates or not.
Despite the monthly decline, economists are still expecting the Fed to continue to slowly raise rates.
“The decline in final demand producer price inflation in August was entirely due to falls in volatile trade, transport and wholesale margins, while underlying consumer services inflation continued to accelerate. That will push the Fed to continue with its gradual pace of rate increases, with the next hike coming at this month’s FOMC meeting,” said Capital Economics senior U.S. economist Michael Pearce.