Gold Prices Holding Modest Gains Following Weak PPI Data
(Kitco News)- Gold prices are holding on to modest gains as producer inflationpressures in the U.S. came in below expectations in the final month of 2017
Producer Price Index (PPI) fell 0.1% in December, followingan increase of 0.4% in November, the U.S. Labor Department said on Thursday.According to consensus forecasts, economists were expecting to an increase of0.2%.
Despite the monthly decrease, annual inflation increased2.6%, its biggest increase since 2011.
Core inflation, which strips out volatile food and energyprices dropped 0.1% last month, following the previous increase of 0.3%. Annualcore inflation rose 2.3%.
February gold futures were modestly higher ahead of thedata, seeing continued safe-haven demand as a result of growing uncertainty infinancial markets. However, the market has seen little reaction to the data,with prices last trading at $1.321.80 an ounce, up 0.17% on the day.
Economists watch producer prices carefully because they areseen as leading indicators as companies pass on higher costs to consumers.
The Federal Reserve is expecting to raise interest ratesthree times in 2018 as they see inflation eventually pushing towards it 2%target.
Royce Mendes, senior economist at CIBC World Markets, saidthat December’s weak report completely undoes the strength reported in theprevious month. He added that the weak PPI data creates some downside risk tothe Consumer Price Index numbers to be released Friday.
“The general trend in underlying prices still appears to be on anupswing, but today's numbers could have some expecting a slightly weaker CPIprint tomorrow. We're already forecasting an only modest increase of 0.1% onthe headline rate, but odds of hitting our 0.2% core projection may havemarginally slimmed,” he said.
By Neils ChristensenFor Kitco News
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