(Kitco News) - The gold market continues to see solid selling pressure even as producers saw weak price pressure last month.
The Producer Price Index (PPI) fell 0.2% in May, following April’s 0.5% increase, the Labor Department said on Thursday. The latest inflation data was significantly cooler than expected, as economists looked for a 0.1% increase.
In the last 12 months headline wholesale inflation increased 2.2%, the report said.
At the same time, core PPI, which strips out volatile food and energy costs, was unchanged last month. Economists were forecasting a 0.3% increase. Annual core PPI increased 2.3%.
The gold market is off its lows but continues to see solid technical selling pressure after it was unable to hold support at $2,350 an ounce. August gold futures last traded at $2,380 an ounce, down 0.71% on the day.
However, some market analysts have said that falling producer prices could give the Federal Reserve confidence to ease interest rates as early as September, supporting gold’s long-term uptrend.
“Fed funds futures are back to fully pricing in two cuts this year,” said Adam Button, Head of Currency Strategy at Forexlive.com
PPI is seen as a leading inflation indicator as producers pass on higher costs to their customers.
