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Gold Prices Under Pressure As Producer Inflation Rises 0.6% In March

Kitco News

(Kitco News) - The gold market remains under pressure after wholesale inflation pressures rose sharply last month.

Thursday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.6% in March, following February’s increase 0.1% ; the data was significantly stronger than expected with economists’ forecasting an increase of 0.3%.

This is the first time in four months that producer inflation beat expectations.

At the same time core PPI, which strips out volatile food and energy costs, increased 0.3% last month, following February’s increase of 0.1%. Economists were expecting to see wholesale inflation rise 0.2%.

However, the gold market is not seeing much reaction to the higher inflation data. June gold futures last traded at $1,301.40 an ounce down 0.94% on the day.

Economists pay close attention to producer prices as it is a leading indicator for consumer prices. Tradionally, companies pass on higher costs to their customers. Economists note that strong PPI data raises the downside risk to consumer inflation pressures.

According to some analysts, gold is not seeing much reaction to the inflation data because most of the increase was due to volatile energy prices. The gasoline index increased 16% last month, according to the report.

For the year, headline inflation rose 2.2%, up from 1.9% reported in February; however, core inflation for the year was 2%, down from February’s reading of 2.3%. According to reports, this is the lowest annual inflation reading since August 2017.

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