U.S PPI Increased Again by 1.1% in September – October Report

According to the recent producer price index monthly update, which was published today, the PPI for finished goods rose by 1.1% in September compared with August’s index.

This report serves as an indicator for the developments in the U.S core CPI to be published next week. This is the second month in row in which the PPI rose by a higher rate than 1% gain.  Last month, the PPI rose by 1.7%. On an annual scale, the PPI rose by 2.1% during the past 12 months.

During September, the food index edged up by 0.2%; further, the energy index hiked again by 4.7%. Thus, the main reason for the rise in PPI was mainly due to the hike in oil prices.

On the other hand, the Producer Price index excluding food and energy remained unchanged during September 2012.

This PPI ex food and energy is estimated to have a lagged negative linear correlation with gold price; i.e. as the PPI increases, 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 silver price. These relations are mainly via the shifts in U.S dollar.  If this relation will hold up in this month’s publication, this news isn’t likely to have a substantial effect on the prices of precious metals.

Currently (as of 17:08 GMT), the prices of gold and silver are falling; the major stock indexes, such as Dow Jones and  S&P500 are edging down; the Euro/USD is modestly rising.

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