Producer Price Index, Consumer Price Index
October 17, 2006
This morning we had the government report the Producer Price Index (PPI) and
tomorrow we'll get the numbers from the Consumer Price Index (CPI), the two
leading inflation indicators in the economy. Again, the devil is in the
details. The PPI showed a decrease for the month of September due mostly
to a significant fall in gasoline prices, but the core rate (the barometer
of prices excluding the food and energy component) increased sharply. So
despite the significant decrease in energy prices over the past month, core
inflation data had a big jump and everyone will be watching the CPI report
very closely tomorrow morning.
To go along with the PPI report, the US dollar is trading weaker this morning,
energy prices have started to rebound, and the Dow is slipping considerably...so
why are metals prices taking it on the chin again?
We're sitting right below key psychological levels for the market at $600
for gold and $12 for silver. The market has been waiting to see a definitive
break above those levels for the bull market to recommence it's march upwards
and it looks like we're just about ready to do that, with or without a precious
metals positive CPI report.
There is also a lot of speculation in the market that leasing of central
bank gold on the London exchange has picked up considerably in the past few
weeks to help corral the prices a bit before the election season. Because of
the Over-The-Counter (OTC) nature of the London market, there will always be
a significant amount of rumor and innuendo that circle around that particular
exchange...and rightfully so.
The London market closes at 10 AM our time. Let's see if we get a significant
bounce back after the activity on that market has ceased for the day.
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