Gold prices are slightly lower this morning as the overall bearish tone in the complex looks set to continue. The market is trading just under the $1180 level, which was a prior support level. This level may now act as resistance, and keep the gold bulls at bay.
With much talk in recent weeks of inflation and volatility in the bond market, this morning’s release of the latest Producer Price Index data was viewed by some analysts as being extra important. The report did show an increase in price pressures as PPI rose .5 percent on a seasonally adjusted basis compared to a drop in April of .4 percent.
On a year-over-year basis, headline inflation fell 1.1 percent according to the report.
The report has led some analysts to believe that a corresponding increase will be seen next week in headline CPI. When looking at core inflation data, inflationary pressures remain relatively weak. That being said, however, the increase in PPI may bolster inflation expectations while also giving the Fed more potential reason to hike rates in September.
Inflation has become a topic of discussion in recent months, as some deflationary pressures appear to be abating that could eventually lead to higher prices. In addition, analysts continue to discuss the Fed and its plans, and some even worry that the central bank may already be a step behind the inflation curve.
Precious metals did not show much reaction to the report and it was essentially a non-event.
Gold is likely moving lower today as a result of bearish outside market activity. The dollar index is moving higher this morning while crude oil prices are weaker.
Selling pressure in gold may remain somewhat subdued, however, as investors continue to await further developments regarding Greece and talks with its creditors. Reports have been mixed as to the productivity of ongoing talks between the country and its creditors. The IMF reportedly pulled out of talks on Thursday, and according to European Commission President Jean-Claude Juncker, the ball is in the Greek Government’s court.
The two sides appear to be quite far apart still on some key issues, and Greece’s creditors are hoping the country will come up with another proposal that is deemed more acceptable. As the bailout extension is set to run out at the end of the month, every day at this point is critical. Even if a deal is reached, it will still take time to put into place. On the other hand, Greece has delayed a payment due to the IMF already in what some feel is simply an act of procrastination. As the deadline approaches, in the absence of a deal or significant progress towards one, markets may become more anxious, and gold could potentially benefit from an increase in risk aversion.