July5 , 2022

Gold prices remain under pressure following 10.8% rise in U.S. producer prices



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(Kitco News) – For some economists it’s still a little too early to call for a peak in inflation; however, wholesale inflation pressures appear to be topping out, rising in line with expectation.

The gold market remains under pressure as inflation fears continue to sweep through financial markets.

Thursday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.8% in May, following April’s 0.5% rise; the data was in line with expectations.

For the year headline inflation rose 10.8% last month, down from April’s annual rise of 10.9%.

“Markets aren’t acting like it, but at some point inflation will begin to turn lower. But with producer prices rising 0.8% in the month, there’s still plenty in the pipeline,” said Adam Button, Chief Currency Strategist at Forexlive.com.

At the same time core PPI, which strips out food and energy costs, rose 0.5%, following April’s rise of 0.4%. Core inflation was not as hot as expected as consensus forecasts called for a 0.6% increase.

Annual core inflation rose 8.3% in May, down from April’s 8.6% increase, the report said.

The gold market is not seeing much reaction following the latest inflation data. Economists note that the latest report won’t have much impact on the Federal Reserve’s monetary policy decision Wednesday. They are on track to raise interest rates by 50 basis points, with markets starting to price in a 75 basis point move following Friday’s surprise rise in consumer prices.

August gold futures last traded at $1,821.50 an ounce, down 0.56% on the day.

The report said that energy prices continue to drive inflation. The report said that the gasoline index increased 8.4% last month. Rising fuel prices continue to be a major concern for businesses and consumers. Sunday, the national average gasoline price hit a record high, pushing above $5 per gallon.

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