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U.S. producer price acceleration slows in July, gold price off its daily highs

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(Kitco News) Gold ticked down but was largely unchanged after the U.S. Producer Price Index (PPI) rose more slowly in July, coming in at 9.8% on an annual basis versus the expected 10.4%.

On a monthly basis, the PPI fell 0.5% in July after June’s 1% advance. Core PPI, which strips out volatile food and energy prices, rose 0.2% month-on-month after June’s gain of 0.3%. And the annual core PPI advanced 9.8% after June’s acceleration to 11.3%. 

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 keeping a very close eye on all the latest inflation metrics at the moment as it weighs the aggressiveness of its upcoming September rate hike.

So far, the Fed has responded that slightly cooler inflation numbers are not enough for the Fed to pivot from its tightening cycle. Minneapolis Fed President Neel Kashkari said Wednesday that he sees the U.S. central bank’s benchmark rate at 3.9% at the end of this year and 4.4% by the end of next year. “I haven’t seen anything that changes that,” Kashkari said.

Chicago Fed President Charles Evans also spoke Wednesday, stating that inflation was still “unacceptably” high, and the Fed will go on tightening for the rest of this year and into next, reaching 3.75%-4% by the end of 2023.

Gold edged down following the data release, with December Comex gold futures last trading at $1,810.30, down 0.19% on the day. Prior to the PPI’s publication, December futures were at a daily high of $1,814 an ounce.

The latest U.S. PPI numbers come one day after the July inflation report showed the first signs of cooling since the Fed began raising rates this year. Price pressures saw a slower acceleration to 8.5% annually after advancing to 9.1% in June. The levels, however, still remain near four-decade highs.

Live 24 hours gold chart [Kitco Inc.]

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