(Kitco News) – The gold market is trading AAAAA after the latest data shows U.S. producers saw cooler price pressures last month.
The headline Producer Price Index (PPI) rose 0.1% in May, following April’s revised -0.2% reading, the U.S. Labor Department announced on Thursday. The latest inflation data was cooler than expectations, as economists looked for a 0.2% increase.
In the last 12 months, headline wholesale inflation increased 2.6%, the report said, in line with the consensus but higher than April’s revised 2.5% reading.
Core PPI, which strips out volatile food and energy costs, rose 0.1% in May, well below economists’ 0.3% consensus forecast and following April’s revised -0.2% reading. Annual core PPI was 3.0%, against the consensus expectation for a 3.1% reading and April’s upwardly revised 3.2% print.
Gold prices continued to climb into the upper end of their daily range after the 8:30 am EDT data release. Spot gold last traded at $3,385.42 for a gain of 0.89% on the day.
PPI is viewed as a leading inflation indicator as producers pass higher input costs on to their customers.
Market analysts have said that falling producer price growth, combined with cooler-than-expected CPI inflation, would enable the Federal Reserve to move up the timeline for further rate cuts, which would represent a tailwind for gold prices.
Bill Adams, Chief Economist for Comerica Bank, told Kitco News that business-to-business inflation was expected to be hotter in May.
“Tariffs were expected to add to the increase of core PPI goods excluding foods and energy, but that component registered an unremarkable moderate increase in May,” he said. “The PPI data don’t report the uptick in input costs visible in the PMI surveys, which showed input cost inflation at the highest since 2022 in May.”
Adams still expects the Fed to hold rates unchanged through year-end, but said the latest inflation and jobless claims data increase the possibility of a cut by then.
“If businesses think demand is too weak for them to pass on the cost of the tariffs, they will have to absorb the costs,” he warned. “That would eat into profits. When profits fall, capital spending and hiring tends to be weaker too, which would slow the overall economy.”
Adams said there are two potential offsets to this dynamic which have yet to show up in the data, and that could keep the Fed sidelined this year.
“The first is that tax cuts in the 2026 tax and spending bill will be stimulative to the economy (and also contribute to higher fiscal deficits, that’s how fiscal stimulus works),” he said. “The second is stricter immigration enforcement, which will reduce growth of the labor force this year. That means less job creation is needed to keep the job market on an even keel. The effect of these is likely to show up in weekly and monthly economic indicators this summer.”
Ernest Hoffman is a Crypto and Market Reporter for Kitco News. He has over 15 years of experience as a writer, editor, broadcaster and producer for media, educational and cultural organizations. Ernest began working in market news in 2007, establishing the broadcast division of CEP News in Montreal, Canada, where he developed the fastest web-based audio news service in the world and produced economic news videos in partnership with MSN and the TMX. He has a Bachelor’s degree Specialization in Journalism from Concordia University. You can reach Ernest at 1-514-670-1339.
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