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Spot gold prices hold near session high as U.S. PPI drops 0.5% in December

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(Kitco News) - Slowing momentum in the U.S. economy appears to be having an effect on inflation as producer prices drop more than expected in December.

Spot gold prices are trading back near session highs above $1,920 an ounce after the U.S. Labor Department said its Producer Price Index (PPI) fell 0.5% last month, November’s revised increase of 0.2%. The inflation data was weaker than expected with consensus estimates calling for a 0.1% drop.

The report said that for the year producer price increased 6.2%, down sharply from the 10% rise seen in 2021.

The report said that core wholesale inflation, which strips out volatile food and energy prices, rose 0.1% last month, in line with expectations.

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.

Some market analysts and said that the the latest inflation data will help to solidify expectations that the Federal Reserve will to continue to slow the pace of its current tightening cycle.

According to the CME FedWatch Tool, markets see a more than 93% chance of a 25 basis point hike next month. Market probabilities have traded at current levels since the start of the week.

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