U.S PPI Slightly Rose in January – February Report

According to the latest producer price index report, which was published today, the PPI for finished goods slightly increased by 0.1% January compared with December.

This report serves as an indicator for the direction of the U.S core CPI to be published tomorrow, February 17th.

During January the food index slightly decreased by 0.3%. During the month, the energy index also declined by 0.5%. Nevertheless, on an annual scale, the PPI increased by 4.1% during the past 12 months

The Producer Price index excluding food and energy rose by 0.4% during January 2011.

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 decrease the following day. Furthermore, the PPI excluding food and energy has a positive linear correlation with silver price. These relations are mainly via the developments in U.S dollar.  If this relation will also hold up in this month’s publication, the news of the PPI rising might adversely affect the direction of gold to trade down and silver price to moderately increase.

Current gold price, short term futures (March 2012 delivery) is traded at $1,719.6 per t oz. a $8.5 increase as of 16:12*.

Current silver price, short term futures (March 2012 delivery) is traded at $33.035 per t oz. a $0.373 decrease as of 16:12*.

Euros to US dollar exchange rate is currently traded up at 1.3048 a 0.14% decrease as of 16:33*.

(* GMT)

For more on this subject: