Wholesale Prices Are Running Hot Again

The May Producer Price Index dropped Thursday morning and the number was not friendly. Wholesale inflation rose 1.1% month-over-month, beating the 0.7% consensus by a wide margin. Year-over-year, the PPI now sits at 6.5% — the fastest annual clip since November 2022. This is not a blip. It follows a revised 1.1% monthly gain in April and a 0.7% rise in March. Three consecutive months above trend.

The part people skip: goods inflation did the heavy lifting. Final demand goods prices surged 2.8% in May alone — the largest single-month increase since the BLS began calculating this data series in December 2009. Gasoline was the headline villain, up 23.4% on the month. Diesel, jet fuel, industrial chemicals, and plastic resins all added to the pile. Services, by contrast, cooled to a 0.3% gain. The split matters because goods inflation is harder for the Fed to argue away.

Strip out food, energy, and trade services and you still get a 0.8% monthly gain in core wholesale prices — the biggest move since March 2022. The year-over-year core reading now stands at 5.1%. That is not a Fed-friendly number heading into next week’s policy meeting.

What the Fed Sees From Here

This is where it gets uncomfortable. The PPI does not directly feed into consumer prices, but it is an early signal — and some of its components, specifically health care services and portfolio management, flow directly into the PCE index, which is the Fed’s preferred inflation gauge. With May CPI already running at a 4.2% annual rate and PPI now at 6.5%, some Wall Street economists are no longer talking about rate cuts. They are asking whether the next move is a hike.

Slight tangent, but it matters: intermediate goods are showing even more heat. Stage 1 intermediate demand prices rose 3.2% in May alone — the largest increase since that data series was first published in 2009. The 12-month read on stage 1 intermediate demand is up 12.3%. That is inflation that has not yet reached final consumers. The pipeline is full.

Newmont ($NEM): The Hard-Asset Play

Gold is responding. And when gold responds to inflation data, Newmont tends to show up on the radar.

NEM rose 5.2% on June 11 — the same day the PPI report landed — bringing shares to roughly $97.59. That follows a rough stretch: the stock dropped about 18.9% over the prior month as gold prices pulled back from their January 2026 all-time high above $5,400 per ounce. The commodity has since settled into a lower range, which compressed NEM’s near-term moves hard. But the fundamental case for the company remains intact.

What Newmont actually is: the world’s largest gold producer, with operations across the U.S., Australia, Ghana, Canada, Peru, and several other jurisdictions. It also produces copper, silver, zinc, and lead as byproducts. In Q1 2026, the company posted EPS of $2.90 — beating estimates by roughly 33% — on revenue of $7.31 billion. Free cash flow hit a record $3.1 billion for the quarter. Adjusted EBITDA came in at $5.2 billion.

• Q1 2026 EPS: $2.90 (est. $2.07–$2.24)
• Q1 revenue: $7.31B (beat by 12%)
• Record quarterly free cash flow: $3.1B
• Adjusted EBITDA: $5.2B
• Gold production Q1: 1.3M ounces
• Full-year 2026 production guidance: 5.3M ounces
• 2027 production target: 6.0M ounces as new projects come online
• All-in sustaining costs (AISC): approximately $1,680/oz for 2026
• Share buyback authorization: $6B, no expiration date
• Dividend: $0.26/share (Q1 2026)

The tension is real: management has guided for 2026 to be a planned production trough year, with output expected to decline roughly 10% before growth resumes in 2027. Rising royalties, taxes, diesel, and labor costs are pushing AISC higher. Insiders sold over $5.5 million in shares over the prior 90 days with no reported buying. These are not signals to ignore.

Bull, Base, and Bear

• Bull: Wholesale inflation stays elevated, the Fed stalls, real rates stay negative or compress further, gold holds above $4,200 and NEM’s 2027 production ramp drives a rerating. Analyst consensus sits near $141–$149 price targets with 18 of 19 analysts at Buy.
• Base: Gold trades sideways in the $4,200–$4,600 range. NEM grinds through its production trough and emerges in 2027 with lower costs and higher output. Stock recovers gradually toward $115–$125.
• Bear: The Fed hikes rates, the dollar strengthens, gold falls back toward $3,800, and NEM’s cost pressure story dominates the discussion. Near-term downside to the low $70s is not off the table based on valuation floor estimates.

The Cheap Investor Scorecard

• PPI year-over-year: 6.5% (highest since November 2022) — watch for July data on August 15
• Core PPI year-over-year: 4.9% — still above Fed comfort zone
• Stage 1 intermediate demand (12-month): +12.3% — pipeline inflation, not yet in CPI
• NEM Q1 FCF: $3.1B record — balance sheet is not the problem
• NEM 2026 AISC guidance: ~$1,680/oz — watch for Q2 update July 29
• NEM 2027 production target: 6.0M oz — the thesis lives or dies here
• Gold price vs. NEM AISC spread: at $4,300+ gold, margins remain wide
• Insider selling: $5.5M net sold, zero buys — worth monitoring
• Analyst average price target: $141.74 — significant implied upside from current levels
• Fed decision (next week): hold, hike signal, or hawkish language — the single biggest near-term catalyst

Here is where I land on this: if you believe wholesale inflation at 6.5% is a policy problem that takes longer than one Fed meeting to resolve, then hard assets with real cash flow — not just gold futures — deserve a closer look. NEM is not cheap by every measure, and a production trough year with rising costs is a real headwind. But the Q1 results show this company can generate record free cash flow even in a difficult quarter. The gap between current price and analyst targets is wide enough to be interesting.

Watch the Fed language next week. Watch gold’s reaction to it. And keep an eye on Q2 earnings July 29 — that is where the cost story either gets worse or starts to stabilize.

– The Cheap Investor