Based on the latest producer price index monthly report, which was published yesterday, the PPI for finished goods sharply fell again by 0.7% in April compared with March’s index.
This report serves as an indicator for the changes in the U.S CPI to be published today. This is the second month this year in which the PPI fell. Last month, the PPI fell by 0.6%. On an annual scale, the PPI increased by only 0.6% during the past 12 months.
During April, the food index decreased by 0.8%; moreover, the energy index tumbled down by 2.5%. Thus, the main reason for the fall in PPI was the decline in energy rates.
Conversely, the Producer Price index excluding food and energy inched up again by 0.1% during April 2013.
This PPI ex food and energy is supposed to have a lagged negative linear correlation with gold price; i.e. as the PPI fall, gold price tends to increase the next day. Conversely, the PPI excluding food and energy tends to have a positive linear correlation with the price of silver. These relations are mainly via the shifts in U.S dollar. If this relation will remain stable for this month’s update, this news is likely to have a modest effect on the prices of bullion today.
During yesterday, the prices of gold and silver plunged; the Euro/USD slightly fell; the major stock indexes, such as Dow Jones, NASDAQ and S&P500 slightly rose on Wednesday.
For more on this subject: