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Gold prices remain under $1,800 following rise in U.S. PPI, up 8.3% annually

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(Kitco News) - The gold market is struggling to hold on to $1,800 an ounce even as inflation pressure continue to rise more than expected.

Friday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.7% in
August following July’s rise of 1.0%; the data was hotter than expected with economists' forecasting an increase of 0.6%.

For the year, headline inflation hit another record high, increasing 8.3%. The report said that this is “the largest advance since 12-month data were first calculated in November 2010.”

Looking at core producer prices, which strips out volatile food and energy costs, the index rose 0.6% last month, following a 1% rise in July. The core inflation data was also hotter than expected with consensus forecasts calling for a rise of 0.5%.

For the year, core PPI rose 6.7%, in line with expectations.

Gold prices are seeing little reaction to the wholesale inflation data. December gold futures last traded at $1,796.10 an ounce down 0.22% on the day.

Some market analysts have said that gold is struggling to attract any new bullish interest because the higher inflation data could force the Federal Reserve to tighten its monetary policy sooner rather than expected.

Expectations surrounding U.S. monetary policy has been extremely volatile lately. Most of the summer economists expected the Federal Reserve to announce a plan to reduce its monthly bond purchases this month.

However, following disappointing employment numbers for August those expectations have been pushed close to the end of the year. Now according to some economists, rising inflation could put the tapper plans back on the agenda at the Sept. 22 monetary policy meeting.

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