Gold edges up to $3,891.50 despite annual inflation reaching 6.5%

Spot gold prices rose 0.39% to around $3,891.50 an ounce in early Friday U.S. trading, according to Kitco News. The metal recovered modestly after dropping to its lowest level in over a year during the previous session. Spot silver also edged up 0.02% to $49.960 per ounce.

The rebound came as the U.S. Labor Department reported that the producer price index increased 0.3% in October, slowing from a revised 1.4% gain in September. Economists had projected a 0.4% increase. However, annual producer inflation accelerated to 6.5%, marking its highest rate since November 2022.

Prices for final demand goods expanded 0.5%, while services costs climbed 0.2%, according to official data. The index excluding food, energy, and trade services advanced 0.5%, matching September's pace. The data points to persistent underlying cost pressures across the economy.

Market expectations before the release showed an 89% probability of a 25-basis-point interest rate hike at the Federal Reserve's Dec. 8-9 meeting, according to futures pricing cited by Kitco. New York Fed President John Williams stated on Thursday that further policy action would likely be needed to control inflation while protecting employment.

Higher Treasury yields and a strong U.S. dollar limited gold's gains, according to Kitco. The benchmark 10-year Treasury yield traded near 5.13%, while the two-year yield stood around 4.86%. The dollar index remained above 103 during Friday's session.

Oil prices were mixed in early trading, with Brent crude futures near $95.54 a barrel and Nymex WTI around $88.18, according to Kitco. U.S. stock index futures rose slightly after Thursday losses where the Dow Jones, S&P 500, and Nasdaq Composite each dropped 0.4%.

What do these terms mean?

Producer Price Index: An economic indicator measuring the average change in selling prices received by domestic producers for their output over time.

Basis point: A standard unit of measurement for interest rates and financial percentages, equal to one-hundredth of a percentage point or 0.01%.

Rate hike: An increase in benchmark interest rates enacted by a central bank to manage economic growth and contain inflation.

Treasury yield: The effective annual interest rate earned by investors holding U.S. government debt obligations.

Dollar index: A financial index that measures the relative strength of the U.S. dollar against a weighted basket of major global currencies.