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Gold price above $1,900 but sees little reaction to rise in U.S. PPI

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(Kitco News) - The gold market is holding above $1,900 an ounce but the price action has been muted following stronger than expected wholesale inflation data.

Wednesday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.4% in September, following August’s 0.3% rise; the data was much stronger than expected with economists’ forecasting a rise of 0.2%.

At the same time core PPI, which strips out volatile food and energy costs, rose 0.4% last month, following August’s increase of 0.4%. The data also beat expectations.

The gold market is seeing some buying momentum mid-week but has seen little reaction to the latest inflation data. December gold futures last traded at $1,910.30 an ounce, up 0.83%.

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. Commodity analysts have said that gold will do well in environment of rising inflation in a low-interest rate environment. This scenario will keep real interest rates low to negative, reducing gold's holding costs as a nonyielding asset.

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