Gold prices higher following disappointing U.S. PPI Data

Gold prices higher following disappointing U.S. PPI Data by Neils Christensen for KitCo News

The gold market is adding to strong gains following the latest Federal Reserve monetary policy announcement and after data highlighted weaker-than-expected producer inflation pressures.

Thursday, the U.S. Labor Department said its Producer Price Index (PPI) was unchanged in November, following October’s 0.4% rise; the data was much weaker than expected with economists’ forecasting an increase of 0.2%.

At the same time core PPI, which strips out volatile food and energy costs, dropped 0.2% last month, following July’s increase of 0.2%. Economists were expecting to see an 0.2% rise.

The disappointing inflation pressure is having a modest impact on gold, pushing prices modestly higher in initial reaction. February gold futures last traded at $1,486 an ounce, up 0.74% on the day.

According to some economists the weak inflation data is positive for gold because it supports expectations that the Federal Reserve will maintain interest rates at its current lower levels for an extended period of time.

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.

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