Over 40 years’ heritage
185,800 clients worldwide
Over 15,000 markets

Gold rises after soft wholesale price data

A report from the US Labor Department today showed declines in prices at the producer level, suggesting the Fed has room to maintain stimulus at its upcoming policy meeting.

The US Bureau of Labor Statistics (BLS) today released its Producer Price Index (PPI) for November. The PPI monitors supply-side prices and this month’s report shows prices paid by wholesalers fell overall in November, with the index dropping 0.1% for the month.

The drops at the headline level were driven by lower energy costs, with gasoline prices continuing to slide after a big drop in October. At the core level, PPI increased 0.1% for the month, with computers and cars providing the biggest drag and light motor trucks leading the price increases.

The change for the year in November was +0.7% at the headline level, which is a very soft level of inflation; the monthly change is the third consecutive decline in headline PPI.

Price data at the consumer level is released next Tuesday, the day on which the December FOMC meeting begins, and with yesterday’s import price report showing declines and today’s soft producer prices it’s likely that the CPI is going to tell a similar story.

In such a low inflation environment, the FOMC will certainly have a justification should it choose to defer tapering until next year.

This extra room to manoeuvre for the Fed has benefitted the price of gold today; by mid-afternoon in New York, the spot gold price was up 0.85% at $1236.0 per troy ounce.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.