Gold prices holding above $1,800 as US PPI rises 7.4% in November, coming in hotter than expected

(Kitco News, Fri. Dec. 9th, 2022) – The gold market is holding support above $1,800 an ounce as wholesale inflation pressure rise more than expected in November, demonstrating that rising prices continue to threaten the U.S. economy.

Friday the U.S. Labor Department said its Producer Price Index (PPI) rose 0.3% last month following October’s revised reading of 0.3%. According to consensus forecasts, the data was hotter than expected with economists looking for a 0.2% rise.

The report said that annual inflation rose 7.4%, also coming in hotter than expected. According to consensus estimates, annual inflation was forecasted to rise 7.2%

Striping out volatile food and energy costs, U.S. producer prices rose 0.4%, up from last month’s unchanged reading. Economists were looking for a 0.2% rise.

For the year, the report said that annual core inflation is up 6.2%. Consensus forecasts were forecasting a rise to 5.9%.

The gold market is seeing some bullish momentum in initial reaction to the latest inflation data. February gold futures last traded at $1,808.20 an ounce, up 0.37% on the day.

According to some analysts, gold is standing its ground even as the U.S. dollar pushes higher in initial reaction to the latest inflation data. Some analysts have said that although rising inflation pressures could force the Federal Reserve to maintain its aggressive monetary policy stance, the economy is close to a breaking point. They noted that the Federal Reserve’s monetary policy could push the U.S. economy into a recession, which would be positive for gold.

Economists pay close attention to producer prices as it is a leading indicator for consumer prices. Traditionally, companies pass on higher costs to their customers.

Global stock markets were mostly higher overnight. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. The U.S. stock index bulls have faded this week as near-term price uptrends on the daily bar charts have been negated. However, risk appetite this week increased mildly as China has eased up on its strict Covid lockdown measures, suggesting the world’s second-largest economy may start to grow at a faster pace.

The key outside markets today see the U.S. dollar index slightly lower. Nymex crude oil prices are modestly higher trading around $72.00 a barrel. Prices Thursday hit an 11-month low. Meantime, the yield on the benchmark U.S. 10-year Treasury note is presently 3.492%.

Higher oil prices are coming in 2023, European energy crisis is not over – Josh Young

Other U.S. economic data due for release Friday includes monthly wholesale trade and the University of Michigan consumer sentiment survey.

Technically, the gold futures bulls have the overall near-term technical advantage. Prices are in a four-week-old uptrend on the daily bar chart. Bulls’ next upside price objective is to produce a close in February futures above solid resistance at the August high of $1,836.70. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,750.00. First resistance is seen at this week’s high of $1,822.90 and then at $1,836.70. First support is seen at $1,800.00 and then at Thursday’s low of $1,793.20.

The silver bulls have the firm overall near-term technical advantage. A choppy, three-month-old uptrend is in place on the daily bar chart. Silver bulls’ next upside price objective is closing March futures prices above solid technical resistance at $24.00. The next downside price objective for the bears is closing prices below solid support at $20.79. First resistance is seen at the overnight high of $23.525 and then at this week’s high of $23.69. Next support is seen at $23.00 and then at Thursday’s low of $22.725

Posted by:

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@3gmail.com