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US PPI rises by less than forecast; Gold edging higher

Summary:

  • US PPI M/M comes in at 0.2% vs 0.3% exp
  • Core reading also rises by less than expected
  • Gold edging higher after Tuesday’s gains

The latest inflation figures from the US have shown a smaller than expected increase in both the headline PPI reading as well as its core figure. After a decline of 0.1% seen back in July, the data for August showed a rise of 0.2% M/M, but with consensus forecasts for a rise of 0.3% this could still be seen as a tad disappointing.  

In addition the core component M/M also moved higher from a 0.1% drop seen previously, but only rose to +0.1% this time out. Again this was slightly lower than the forecast of +0.2% and will do little to ratchet up the pressure on the Fed to raise rates again before year-end. 

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 The US dollar is holding up fairly well despite the disappointing PPI and is just edging higher on balance ahead of the US session. Source: xStation

Whilst the PPI is seen by some as an important inflation metric, most traders give a greater credence to the CPI reading which is due out tomorrow at 1:30pm (BST). 

The seemingly rapid improvement in risk sentiment seen this week has weighed on Gold with the precious metal falling sharply lower after making a 2017 peak of 1357 during Friday’s session. The final trading day of last week perhaps revealed some weakness in the market with a shooting star of sorts printed on D1.

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 Gold has dropped sharply lower this week after making a 2017 peak of 1357 last Friday. 1327 could be seen as a key line in the sand. Source: xStation 

From a longer time perspective the breakout seen since price breached and closed above 1295 at the end of August remains valid unless the market moves back below this level. Price is towards the middle of the 1295-1357 range at present and 1327 could be seen as a key line in the sand. If price remains above here then a retest of the high at 1357 is possible but should price drop back below 1327 then keep an eye out for a retest of the breakout zone at 1295. 

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