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Gold prices push slightly higher following 0.3% drop in U.S. PPI

Kitco News

(Kitco News) - The gold market continues to hold its ground with prices holding above $1,500 an ounce as pipeline inflation pressures fell sharply last month

Tuesday, the U.S. Labor Department said its Producer Price Index (PPI) fell 0.3% in September, following August’s 0.3% rise; the data was weaker than expected with economists’ forecasting an increase of 0.2%.

At the same time core PPI, which strips out volatile food and energy costs, fell 0.34% last month. Economists were expecting a 0.1% increase. 

Gold prices have pushed slightly higher in initial reaction to the data. December gold futures last traded at $1,511.90 an ounce up 0.50% on the day.

Some economists have noted that the weak inflation pressures should continue to support gold because it means that the Federal Reserve has room to cut interest rates again at its monetary policy meeting at the end of the month. The CME FedWatch Tool shows that markets are pricing in a 77% chance that the U.S. central bank will cut interest rates on Oct. 30.

Economists pay close attention to producer prices as it is a leading indicator for consumer prices. Traditionally, companies pass on higher costs to their customers.

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