Gold prices holding above $1,800 as US PPI rises 7.4% in November, coming in hotter than expected
(Kitco News) - The gold market is holding support above $1,800 an ounce as wholesale inflation pressure rise more than expected in November, demonstrating that rising prices continue to threaten the U.S. economy.
Friday the U.S. Labor Department said its Producer Price Index (PPI) rose 0.3% last month following October’s revised reading of 0.3%. According to consensus forecasts, the data was hotter than expected with economists looking for a 0.2% rise.
The report said that annual inflation rose 7.4%, also coming in hotter than expected. According to consensus estimates, annual inflation was forecasted to rise 7.2%
Striping out volatile food and energy costs, U.S. producer prices rose 0.4%, up from last month's unchanged reading. Economists were looking for a 0.2% rise.
For the year, the report said that annual core inflation is up 6.2%. Consensus forecasts were forecasting a rise to 5.9%.
The gold market is seeing some bullish momentum in initial reaction to the latest inflation data. February gold futures last traded at $1,808.20 an ounce, up 0.37% on the day.
According to some analsyts, gold is standing its ground even as the U.S. dollar pushes higher in initial reaction to the latest inflation data. Some analysts have said that although rising inflation pressures could force the Federal Reserve to maintain its aggressive monetary policy stance, the economy is close to a breaking point. They noted that the Federal Reserve's monetary policy could push the U.S. economy into a recession, which would be positive for gold.
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.