(Kitco News) - The gold market continues to hold near record highs above $3,200 an ounce and is paying little attention to economic data as U.S. wholesale inflation pressures fell sharply last month.
The headline Producer Price Index (PPI) dropped 0.4% in March, following February’s revised 0.1% reading, the U.S. Labor Department announced on Friday. The latest inflation data was significantly cooler than expectations, as economists had predicted a 0.2% increase.
In the last 12 months, headline wholesale inflation increased by 2.7%, well below the consensus of 3.3%.
Core PPI, which strips out volatile food and energy costs, dropped 0.1% last month, in line with February’s 0.1% decline. Economists had forecast a 0.3% increase. Annual core PPI was 3.3%, also well below the consensus expectation of 3.6%.
The report indicated that lower energy prices were the biggest contributing factor behind the drop in producer prices.
Gold is not paying much attention to the forward-looking inflation numbers as the market continues to attract significant safe-haven flows due to the weakening U.S. dollar and elevated bond yields. Spot gold last traded at $3,230.40 an ounce, up nearly 2% on the day.
Some economists note that the inflation data is outdated as the market continues to react to President Donald Trump’s global reciprocal tariffs, which were in place for a week before being halted for 90 days.
“While tariff effects didn’t move the needle for either CPI or PPI in March, there were some signs of them in this release, with the steel mill product PPI jumping by 7.1%. The broader tariffs that took effect last week will start to feed through in the next set of monthly price data, although the recent weakness in markets and evidence of some economic weakness may give the Fed more confidence that these will not have significant second-round effects,” said Stephen Brown, Deputy Chief North America Economist at Capital Economics.
