Gold shines brighter ahead of US inflation data

The news shaping the markets today

Top secret US government files on the Russia-Ukraine war were leaked on social media platforms, showing the involvement of Western forces. Despite the continued geopolitical tensions, the safe-haven US dollar index fell this morning.

Australia’s building permits rose by 4.0% to 12,661 units in February, lending support to the AUD/USD forex pair.

Japan’s core machinery orders fell 4.5% in February, versus 9.5% growth in January. However, the decline was less than market expectations of 7.8%, which sent the JPY/USD pair slightly higher in forex trading this morning.

New Zealand’s electronic card transactions rose 0.7% to NZ$6,824 million in March, following a 0.1% decline in the prior month. The news lent support to the NZD/USD forex pair.

South Korea’s unemployment rate rose to 2.7% in March, from 2.6% in the prior month, sending the KRW/USD pair lower in forex trading this morning.

What’s happening: Gold prices moved higher on Tuesday, settling above the key $2,000 resistance level.

What happened: Weakness in the US dollar lent support to the safe-haven metal on Tuesday.

Gold prices settled above the key $2,000 level for the sixth session in a row ahead of US inflation data.

Why it matters: Gold prices had declined by around 1% on Monday US NFP (nonfarm payrolls) data signalled a strong labour market in the country, increasing speculations of the Federal Reserve hiking its benchmark interest rates at its May meeting.

The NFP report showed 236,000 job adds in March and a decline in the unemployment rate to 3.5%.

Weakness in the US dollar and the easing of inflation in China provided support to gold prices on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, lost around 0.4% to 102.20.

China’s annual inflation rate for March came in at 0.7%, the lowest level since September 2021. The country’s producer prices also declined 2.5% year-over-year in March, versus a 1.4% decline in February. This was also the steepest decline since June 2020.

Sentiment for safe havens also improved after the IMF revised its global growth estimates lower, from 2.9% to 2.8% for 2023 and from 3.1% to 3% for 2024, citing factors like the monetary policy tightening by central banks and the ongoing Russia-Ukraine conflict.

Gold futures for June delivery climbed $15.20, or 0.8%, to finish at $2,019 per ounce on Tuesday. Silver futures for May delivery added 27 cents, or 1.1%, to settle at $25.19 an ounce.

Copper added 1.1% to reach $4.02 per pound, while June palladium rose 2.6% to $1443.60 per ounce and July platinum gained 0.2% to close at $1,005.10 per ounce.

What to watch: US inflation data, due to be released on Wednesday, will offer more insights into the Fed’s rate hike moves ahead. The US CPI had accelerated by 0.4% month-over-month in February and is expected to ease to 0.3% in March. Analysts expect the annual inflation rate to ease to 5.2% in March, from 6% in February.

The markets today

The Canadian dollar will be in focus today ahead of the central bank’s interest rate decision

Context: The CAD/USD forex pair moved higher on Tuesday after reaching a ten-day low in the prior session.

Details: An improvement in trader risk sentiment, on prospects of central banks soon putting a pause to their interest rate hikes, lent support to global stocks on Tuesday.

Canada’s inflation rate eased much more than expected to reach its lowest level in 13 months in February. The annual inflation rate decelerated to 5.2% in February, from 5.9% in the previous month, recording the biggest single month decline in around three years.

A rise in the prices for oil, one of Canada’s major exports, also lent support to the loonie on Tuesday. WTI crude oil for May delivery added $1.79 to settle at $81.53 per barrel.

The CAD/USD forex pair added over 0.3% to reach 1.3466 on Tuesday, after hitting its weakest intraday level since March 31 on Monday. The S&P/TSX Composite index jumped 0.72% to close at 20,421.85, extending gains from the previous session.

What are expectations: Traders await the Bank of Canada interest rate decision today. The BoC is widely expected to maintain its interest rate at 4.5%, after holding its overnight rate unchanged at its March meeting.

Other Markets: US trading indices closed mixed on Tuesday, with the S&P 500 and Nasdaq 100 down by 0.01% and 0.67%, respectively, and the Dow Jones index up by 0.29%.

Support & resistances for today

Market snapshot

What else to watch today

Turkey’s retail sales, Brazil’s retail sales, India’s industrial production, manufacturing production and consumer price inflation, US MBA mortgage applications, crude oil inventories, stocks of gasoline, distillate stocks, FOMC minutes and monthly budget statement, Russia’s inflation rate, as well as South Africa’s SACCI business confidence index.