(Kitco News) – The gold market is holding its own as U.S. wholesale inflation pressures rose more than expected last month.
Tuesday, the U.S. Labor Department said its Producer Price Index (PPI) rose 0.3% in March following an increase of 0.2% in February. According to consensus forecasts, economists were expecting an increase of 0.1%.
For the year, producer prices rose 3.0%.
Core PPI, which strips out volatile food and energy costs, also rose 0.3% last month, following a 0.2% increase in February. Annual core inflation rose 2.7%.
Gold prices were in positive territory ahead of the report and have added to those gains in initial reaction. June gold futures last traded at $1,341.70 an ounce, up on the day 0.12% on the day.
Market participants pay close attention to the PPI as a gauge for inflation at the wholesale level. PPI is seen as a leading indicator because traditionally, producers pass on higher prices to their customers.
According to some economists, the rise in producer prices is a sign that inflation is finally starting to heat up, which could force the U.S. central bank to raise interest more aggressively this year.
However, markets will have to until Wednesday to see if companies are passing on higher prices to their consumers. Currently markets are expecting to see no change in March’s Consumer Price Index.
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