According to the latest producer price index monthly report, which came out today, the PPI for finished goods rose by 1.7% in August compared with July’s index.
This report serves as an indicator for the developments in the U.S core CPI to be published tomorrow, September 14th. This is the sharpest gain in a single month since February 2012. On an annual scale, the PPI rose by 0.5% during the past 12 months
During August the food index increased by 0.9%; further, the energy index hiked by 6.4%. The recent news of the drought in the U.S is probably among the factors pulling up the food index. Further, this could also suggest the drought may continue affecting the food index in the following months.
This means that most of the rise in the U.S PPI is attributed to the increase of energy prices during last month.
Furthermore, the Producer Price index excluding food and energy rose by 0.2% during August 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 decline the next day. On the other hand, the PPI excluding food and energy tends to have a positive linear correlation with silver rate. These relations are mainly via the changes in U.S dollar. If this relation will hold up in this month’s publication, the news of the U.S PPI ex food and energy rising could adversely affect gold price during tomorrow’s trading (assuming all things being equal).
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