U.S PPI Declined again by 0.2% in December – January Report

According to the latest producer price index monthly report, which was published yesterday, the PPI for finished goods declined again by 0.2% in December compared with November’s index.

This report serves as an indicator for the changes in the U.S CPI to be published later this week. This is the third consecutive month in which the PPI fell.  Last month, the PPI fell by 0.8%. On an annual scale, the PPI rose by 1.3% during the past 12 months.

During December, the food index fell by 0.9%; furthermore, the energy index also declined by 0.3%. Thus, the main reason for the fall in PPI was the plunge in food prices.

On the other hand, the Producer Price index excluding food and energy edged up again by 0.1% during December 2012.

This PPI ex food and energy is estimated to have a lagged negative linear correlation with gold price; i.e. as the PPI increase, gold price tends to decline the next day. On the other hand, the PPI excluding food and energy tends to have a positive linear correlation with silver price. These relations are mainly via the shifts in U.S dollar.  If this relation will remain stable for this month’s publication, this news is likely to have a modest effect on the prices of precious metals.

Currently (as of 08:53 GMT), the prices of gold and silver are slightly declining; the Euro/USD is modestly decreasing; the major stock indexes, such as Dow Jones, NASDAQ and  S&P500 moved in a mixed trend yesterday.

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