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Gold price bounces off lows following disappointing U.S. PPI data

Kitco News

(Kitco News) - Gold prices are trading in positive territory, finding new momentum following weak pipeline inflation pressures.

Wednesday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.1% in December, following November’s unchanged reading; 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, rose 0.1% last month, following November’s drop of 0.2%. Economists were expecting to see a 0.2% rise.

Commodity analysts have noted that the weak inflation pressures can be positive for the gold market because it means that the Federal Reserve will maintain is extremely accommodative monetary policy. February gold futures last traded at $1,550.60 an ounce, up 0.39% on the day.

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.

Andrew Hunter, senior U.S. economist at Capital Economic said that Tuesday’s CPI and PPI shows that inflation is well contained.

“Overall, there is still little sign of any significant rise in price pressures at the start of the inflation pipeline, underlining our view that the Fed will keep interest rates on hold for the foreseeable future,” he said.

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