Based on the latest producer price index monthly report, which was published yesterday, the PPI for finished goods sharply rose by 0.7% in February compared with January’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 in a row in which the PPI rose. Last month, the PPI rose by 0.2%. On an annual scale, the PPI increased by 1.7% during the past 12 months.
During February, the food index decreased by 0.5%; alternatively, the energy index spiked by 3%. Thus, the main reason for the rise in PPI was the spike in energy prices.
Moreover, the Producer Price index excluding food and energy also increased again by 0.2% during February 2013.
This PPI ex food and energy is supposed 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 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 publication, this news is likely to have a modest effect on the prices of precious metals.
Currently (as of 11:35 GMT), the prices of gold and silver are slightly rising; the Euro/USD is also increasing; the major stock indexes, such as Dow Jones, NASDAQ and S&P500 also rose yesterday.
For more on this subject: