Silver rallies 2.0% after release of US “factory gate” inflation data

• Silver spikes higher following the release of mixed Producer Price Index data. 
• Although the annual figures came in lower than expected, the monthly data rose. 
•  US Jobless claims released at the same time showed an uptick in people claiming benefits. 

Silver (XAG/USD) price is trading higher on Thursday after the release of US “factory gate” inflation, otherwise known as the Producer Price Index (PPI). The precious metal is exchanging hands in the $29.30s after rising over 2.0% on the day and breaching the top of a mini-consolidation zone. 

The Producer Price Index, which is often seen as a predictor of broader inflation, came in mixed in August, with the monthly readings beating – but the annual readings falling below expectations. There were also substantial downward revisions to July’s data. The US Dollar (USD) sold off following the release, and precious metals like Gold and Silver, which are negatively correlated to USD, rose. 

The Producer Price Index (PPI) ex Food & Energy rose by 2.4% in August, the same as the 2.4% registered in July. The result came in below expectations of 2.5%, according to data from the US Bureau of Labor Statistics (BLS).  

In the month, core PPI rose 0.3% compared to the downwardly revised 0.2% decline in July. Economists had expected a 0.2% rise. 

Headline PPI, meanwhile, rose 1.7% in August after a downwardly revised 2.1% rise in the previous month. The result was below expectations of 1.8%. On a monthly basis, PPI rose 0.2%, compared to the revised down 0.0% registered in July and was above the 0.1% expected. 

Employment data released at the same time showed US Initial Jobless Claims rose 230K in the week ending September 6, coming in above the revised-up 228K of the previous week and was in line with the 230K forecast. 

Continuing Jobless Claims rose to 1.850M, which was higher than the previous week’s revised up 1.845M, according to the US Department of Labor. 

Although the data caused the US Dollar to fall, it did not change the outlook for interest rates in the US. The probability of a larger 0.50% reduction at the Federal Reserve’s (Fed) September meeting stayed around the 13%-15% mark following the release, according to the CME FedWatch tool, after falling dramatically on Wednesday following CPI data.