U.S PPI Slightly Fell in December – January Report

According to the recent producer price index report, which was published yesterday, the PPI for finished goods slightly decreased by 0.1% December compared to November.

This report serves as an indicator for the direction of the U.S core CPI to be published today, January 19th.

The food index sharply fell by 0.8% during December; the energy index also sharply declined by 0.8% during the month. Nevertheless, on an annual scale, the PPI increased by 4.8% during the past 12 months

The Producer Price index excluding food and energy rose by 0.3% during December.

This PPI ex food and energy is estimated to have a lagged negative linear correlation with gold price; i.e. as the PPI falls, gold price tends to increase the following day. Furthermore, the PPI excluding food and energy has a positive linear correlation with silver price. These relations are mainly via the changes in U.S dollar.  If this relation will also hold up in this month’s publication, the news of the PPI rising might affect gold price to slightly decrease and silver price to moderately increase.

Current gold price, short term futures (February 2012 delivery) is traded at $1,662.4 per t oz. a $2.5 increase as of 23:20*.

Current silver price, short term futures (February 2012 delivery) is traded at $30.525 per t oz. a $0.018 decrease as of 23:20*.

Euros to US dollar exchange rate is currently traded up at 1.2865 a 0.0074% increase as of 23:35*.

(* GMT)

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