Hot producer inflation pressures unable to lift gold prices – Kitco NEWS

Welcome to Kitco News’ 2022 outlook series. The new year will be filled with uncertainty as the Federal Reserve looks to pivot and tighten its monetary policies. At the same time, the inflation threat continues to grow, which means real rates will remain in low to negative territory. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2022.

(Kitco News)Gold prices continue to struggle to attract bullish interest even as producer price pressures increase more than expected, adding to the overall growing inflation threat.

Tuesday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.8% in November following October’s rise of 0.6%; the data was stronger than expected, with economists forecasting an increase of 0.5%.

The report said that annual inflation rose 9.6%. This is a new record high for producer prices.

The gold market is not seeing much reaction to the latest inflation data. February gold futures last traded at $1,778.40 an ounce, down 0.55% on the day.

Core PPI, which strips out volatile food and energy costs, rose 0.7% last month, following October’s increase of 0.4%. Economists were expecting to see a 0.4% rise.

The report said that annual core PPI is also at record levels, rising 6.9%.

Economists are paying close attention to producer prices as it is a leading indicator for consumer prices. Traditionally, companies pass on higher costs to their customers.

“When your input prices are rising nearly 10% in a year, there’s a good chance that’s getting passed on,” said Adam Button, chief currency strategist at

According to some market analysts, gold prices are struggling following the latest inflation data because it creates more pressure for the Federal Reserve to tighten its monetary policy sooner than expected.

The Federal Reserve will announce its latest monetary policy decision Wednesday. Markets already expect that the U.S. central bank will increase the speed of tapering. Markets are also expecting the Federal Reserve to raise interest rates in June with a total of four rate hikes priced in for 2022.

Button noted that the latest inflation numbers are helping support the U.S. dollar, which is a headwind for gold.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Leave a comment

Your email address will not be published. Required fields are marked *