(Kitco News) - The gold market remains stuck in neutral, holding solid support above $3,300 an ounce but unable to gain significant traction, even as wholesale inflation pressures remained unchanged last month.
The headline Producer Price Index (PPI) was flat in June, following a 0.1% increase in May, the U.S. Labor Department announced on Thursday. The latest inflation data came in cooler than expected, as the consensus forecast had called for a 0.2% increase.
Over the past 12 months, headline wholesale inflation rose 2.3%, according to the report. Annual inflation was also weaker than expected, with economists anticipating a 2.5% increase. The prior month’s annual inflation figure was revised higher to 2.7%, up from the initial estimate of 2.6%.
Excluding volatile food and energy prices, core PPI was also unchanged last month, following a 0.1% rise in May. According to consensus estimates, economists had forecast a 0.2% increase.
According to some analysts, the headline inflation data should provide some support for gold, as it indicates inflation pressures are relatively under control—potentially giving the Federal Reserve room to cut interest rates later this year.
However, some economists also note that economic uncertainty and inflation fears remain elevated due to President Donald Trump’s import tariffs and the ongoing global trade war. PPI is considered a leading inflation indicator, as producers typically pass higher input costs on to consumers.
Spot gold last traded at $3,333 an ounce, up 0.31% on the day.
Looking at a breakdown on producer costs, while headline and core wholesale inflation were subdued, final demand goods prices rose 0.3%; at the same time, they were offset by a 0.1% fall in services. Within the goods category, tariff-sensitive communication equipment posted a gain of 0.8%.
According to the PPI release, energy prices rose 0.6% last month, while food prices increased 0.2%.
Jamie Cox, Managing Partner for Harris Financial Group, said that he doesn’t expect the subdued wholesale inflation data to have much impact on interest rate expectations. Markets are expected the Federal Reserve to start cutting in September.
“Disinflation remains, but the Fed will be undeterred in keeping rates steady until September. As long as the labor market remains strong and resilient, rates aren’t likely to move meaningfully lower, and that’s a good thing. Inflation has hurt millions of Americans and being able to focus on that was needed,” said Cox.
