Impact of the Producer Price Index on gold prices: Evidence from ARDL and VAR models

This study examines the relationship between the Producer Price Index and international gold prices using monthly time-series data for 2006–2026. The autoregressive distributed lag model, bounds testing, vector autoregression, impulse response analysis, and variance decomposition are employed to assess short- and long-term relationships. The findings indicate that PPI significantly affects gold prices and that a long-term cointegrating relationship exists among the variables. A positive PPI shock initially reduces gold prices because of expectations of tighter monetary policy, higher interest rates, and a stronger US dollar, but subsequently increases gold prices as inflation-hedging demand strengthens. Interest rates, the US dollar index, and the S&P 500 exhibit weaker and statistically unstable effects. The study provides empirical evidence for investors and policymakers monitoring inflationary pressures and gold-market fluctuations.