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Gold Remains Under Pressure Following 0.4% Rise In U.S. PPI

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(Kitco News) - Gold prices, under pressure from a stronger U.S. dollar, saw little reaction as producer inflation pressures picked up in the U.S. October.

Tuesday, the Labor Department said its Producer Price Index (PPI) rose 0.4% last month following an increase of 0.4% in September. According to consensus forecasts, economists were expecting to an increase of 0.1%. Annual producer inflation rose to 2.8%.

Core inflation, which strips out volatile food and energy prices, was up 0.4% in October, following a 0.4% rise in September. Economists were expecting to see a modest increase of 0.2%. For the year, core inflation is up 2.4%.

Gold was already down ahead of the report and has seen little movement in initial reaction, with December Comex gold futures last seen trading at $1,273.60 an ounce, down 0.41% on the day. Gold has been stuck in a fairly narrow channel for more than three weeks.

With producers are seeing rising inflation pressures, some economists have said that they are  expecting to see this trend filter through to consumers, adding that it is only a matter of time before the Consumer Price Index picks up. Higher inflation pressures would give the Federal Reserve to raise interest rates more aggressively than markets are currently expecting.

The Consumer Price Index will be released Wednesday.

“The above consensus readings on today's prices does lend some support to our on-consensus call for a 0.2% core CPI reading tomorrow, given that it's been tracking softer than that recently. Still, markets will wait for tomorrow’s data to make a judgement on whether inflation is perking back up,” said Royce Mendes, senior economist at CIBC World Markets

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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