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Gold price tumbles to new daily lows as U.S. PPI comes in below expectations

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(Kitco News) Gold tumbled to new daily lows after a slate of negative macroeconomic data, including the U.S. Producer Price Index (PPI), which disappointed expectations in December by rising just 0.3%.

Market’s consensus was expecting to see a rise of 0.4% on a monthly basis.

The annual PPI came in-line with market forecasts, rising 0.8%. Core PPI, which strips out volatile food and energy prices, disappointed with a rise of 0.1% versus the expected 0.2% advance. And the annual core PPI was up 1.2% versus the expected 1.3%.

Market participants pay close attention to the PPI as a gauge for inflation at the wholesale level. It is seen as a leading indicator because traditionally producers pass on higher prices to their customers.

The Federal Reserve is also constantly keeping a close eye on inflation pressures.

Fed Chair Jerome Powell addressed inflation during a LIVE event at the Princeton University Bendheim Center for Finance on Thursday, stating that the central bank hasn’t tied itself to any particular mathematical formula when it comes to its new average inflation targeting.

Powell also noted that market participants shifted expectations when it comes to rates and inflation, saying that the public needs to see the Fed allowing inflation to move above 2%. “Too low inflation is much more dangerous,” he said.

Also, Powell pointed out that in the near-term, inflation could start to accelerate. “As the pandemic recedes and we see a strong wave of spending, we could see upward pressure on prices. But the real question is how large will that effect be and will it be persistent,” he said.

Live 24 hours gold chart [Kitco Inc.]

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