According to the latest producer price index monthly update, which came out today, the PPI for finished goods declined by 0.2% in April compared with March’s index.
This report serves as an indicator for the progress of the U.S core CPI to be published next week, May 15th. On an annual scale, the PPI rose by 1.9% during the last 12 months
During April the food index edged up by 0.2%, while the energy index tumbled down by 1.4%.
This means that most of the fall in the U.S PPI is attributed to the tumble of the energy prices during last month.
On the other hand, the Producer Price index excluding food and energy increased by 0.2% during April 2012.
This PPI ex food and energy is estimated to have a lagged negative linear correlation with gold price; i.e. as the PPI rises, gold price tends to fall the following day. Furthermore, 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 continue to hold up in this month’s publication, the news of the U.S PPI ex food and energy slightly increasing may positively affect the direction of gold price during next trading day (assuming all things being equal).
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