Based on the recent producer price index monthly update, which was published yesterday, the PPI for finished goods changed course and rose by 0.2% in January compared with December’s index.
This report serves as an indicator for the developments in the U.S CPI to be published today. This is the first time in four months in which the PPI rose. Last month, the PPI declined by 0.3%. On an annual scale, the PPI rose by 1.4% during the past 12 months.
During January, the food index increased by 0.7%; alternatively, the energy index declined by 0.4%. Thus, the main reason for the rise in PPI was the spike in food prices.
Moreover, the Producer Price index excluding food and energy also increased again by 0.2% during January 2013.
This PPI ex food and energy is supposed to have a lagged negative linear correlation with gold price; i.e. as the PPI rise, gold price tends to fall the next day. On the other hand, the PPI excluding food and energy tends to have a positive linear correlation with the price of silver. These relations are mainly via the developments 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 rates of bullion.
Currently (as of 08:27 GMT), the prices of gold and silver are falling; the Euro/USD is also decreasing; the major stock indexes, such as Dow Jones, NASDAQ and S&P500 sharply declined yesterday.
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