What Happens to Gold (Spot) When PPI Turns Negative?
What happens when Producer Price Index turns negative? Deflation risk, margin implications, and the leading signal for CPI disinflation.
How Gold (Spot) Responds
Scenario Background
The Producer Price Index (PPI) measures wholesale prices received by domestic producers. PPI typically leads CPI by 3 to 6 months because producer input costs eventually pass through to consumer prices. A negative PPI print (goods deflation at the wholesale level) signals imminent disinflation or deflation risk in consumer prices.
Read full scenario analysis →Historical Context
PPI turned negative YoY in 2009 (recession-driven), 2015-2016 (oil crash), and 2020 (COVID shock). The 2022-2023 cycle saw PPI peak at 11.7% YoY and decelerate to negative territory briefly in summer 2023 as energy prices collapsed. Prolonged PPI deflation in Japan (1990s-2010s) coincided with their extended economic stagnation. The 1980s saw PPI deflate during the Volcker-era disinflation, confirming broader inflation normalization.
What to Watch For
- •PPI final demand declining for 3+ consecutive months YoY
- •ISM Manufacturing Prices Paid below 50
- •Commodity prices (CRB Index) declining sharply
- •Core goods CPI turning negative alongside PPI
- •China PPI persistently deflationary
Other Assets When PPI Turns Negative
Other Scenarios Affecting Gold (Spot)
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