Gold Prices See Small Drop Following Stronger Than Expected PPI Inflation Data

(Kitco News) – U.S. consumers could see higher prices down the road as data highlight increase in producer inflation.

Friday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.1% in June, following May increase of 0.1%; the data was in line with expectations.

At the same time core PPI, which strips out volatile food and energy costs, increased 0.3% last month, following May’s increase of 0.2%. Economists were expecting to see wholesale inflation rise by 0.2%.

The data is creating a little selling pressure in gold prices as prices continue to hold above $1,400 an ounce. August gold futures last traded at $1,406.10 an ounce, relatively unchanged on the day.

Economists pay close attention to producer prices as it is a leading indicator for consumer prices. Companies pass on higher costs to their customers.

Some analysts have noted that the latest inflation data will have little impact on gold prices as markets continue to expect the Federal Reserve to cut interest rates at the end of the month. Economists have noted that rising inflation won’t spook the U.S. central bank very much as it has been low for an extended period.

The Federal Reserve has said that it could let inflation run hot to achieve an “symmetrical” 2% inflation target.

By Neils Christensen
For Kitco News


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