What’s happening: Gold prices retreated from three-week highs and settled lower on Friday on some profit taking.
What happened: Uncertainties around the potential impact of US President-elect Donald Trump’s proposed policies led to safe-haven demand last week.
However, strength in the US dollar exerted pressure on gold prices.
Why it matters: Donald Trump is scheduled to take oath as the new US President on January 20. While investors expect his pro-business policies to boost economic growth in the US, there are concerns around the proposed tariffs to cause inflationary pressures.
Elevated inflation would force the Federal Reserve to slow its monetary policy tightening, boosting demand for the greenback and exerting pressure on precious metals. After announcing three rate cuts last year, the Fed is widely expected to announce only two in 2025.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, recorded its best weekly performance since mid-November. Strength in the US dollar makes the yellow metal more expensive for foreign currency holders.
Gold futures fell 0.5% to settle at $2,654.70 an ounce on Friday but recorded weekly gains of around 1% due to higher seasonal demand. Gold prices slipped further to $2,654.20 this morning.
In other metals trading, silver prices settled higher at $30.065 an ounce on Friday and platinum jumped to $948.3, while palladium closed higher at $922.50.
What to watch: The release of the much-awaited NFP (nonfarm payrolls) report from the US, scheduled for Friday, will remain in focus. The US economy, which added 227,000 jobs in November, is expected to add just 150,000 jobs in December.
The unemployment rate, which rose to 4.2% in November from 4.1% in the previous month, is expected to remain at 4.2% in December. Analysts expect average hourly earnings for all employees on private nonfarm payrolls to increase to 0.3% in December, following a 0.4% gain in November.
Context: Equity markets in Europe settled lower on Friday, as investors continued monitoring potential changes in US policies under the new President.
Details: The STOXX 600 index had jumped to record highs in 2024 but concerns around a slowdown in the European economy and prospects of tariffs imposed by US President Donald Trump limited the overall gains for the pan European index.
Investors also continued monitoring the European Central Bank’s monetary policy outlook. One of the central bank’s policymakers Yannis Stournaras has projected interest rates to be lowered to 2% by autumn.
The STOXX Europe 600 Index fell 0.49% to close at 508.19 on Friday amid light volumes during the holiday-shortened week.
Auto stocks were among the worst performers, down around 1.8%, with travel and leisure shares also falling 1.6%. Financial services stocks bucked the overall market trend and rose around 0.4%, while oil and gas shares surged more than 1%.
London’s FTSE 100 fell 0.44% to settle at 8,223.98 on Friday, while Germany’s DAX 40 declined 0.59% to 19,906.08. France’s CAC 40 lost 1.51% to close at 7,282.22, recording its biggest single-day plunge in over seven weeks.
What to watch: Investors await the release of economic data on Eurozone’s HCOB composite PMI (1255 UAE Time) and HCOB services PMI (1255 UAE Time) today. Analysts expect the HCOB flash Eurozone composite PMI to rise to 49.5 in December, versus 48.3 in the previous month, while services PMI is projected to increase to 51.4 in December, from 49.5 in November.
Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.80%, 1.26% and 1.67%, respectively.
The Ukrainian offensive strengthened with blasts being heard near Russia’s Zaporizhzhya nuclear plant. The news sent the RUB/USD slightly lower in forex trading this morning.
Ireland’s AIB services PMI slipped to 57.1 in December, from a reading of 58.3 in the previous month. However, the services activity remaining in the expansion zone lent support to the EUR/USD forex pair.
Australia’s S&P Global PMI composite output index was revised higher to 50.2 in December, compared to a flash reading of 49.9. Composite output moving to the expansion zone sent the AUD/USD pair higher in forex trading this morning.
Japan’s au Jibun Bank services PMI was revised lower to 50.9 in December, from a flash reading of 51.4. The figure also came below November’s 50.5, exerting pressure on the JPY/USD forex pair.
Hong Kong’s S&P Global SAR PMI fell to 51.1 in December, from 51.2 in the previous month, which sent the HKD/USD pair slightly lower in forex trading this morning.
Spain’s HCOB services PMI (1215 UAE Time), HCOB composite PMI (1215 UAE Time) and business confidence (1600 UAE Time), Italy’s HCOB composite PMI (1245 UAE Time) and HCOB services PMI (1245 UAE Time), France’s HCOB composite PMI (1250 UAE Time) and HCOB services PMI (1250 UAE Time), Germany’s HCOB composite PMI (1250 UAE Time), HCOB services PMI (1250 UAE Time) and inflation rate (1700 UAE Time), UK’s new car sales (1300 UAE Time), S&P Global services PMI (1330 UAE Time) and S&P Global composite PMI (1330 UAE Time), Mexico’s consumer confidence (1600 UAE Time), Brazil’s S&P Global services (1700 UAE Time), S&P Global composite PMI (1700 UAE Time) and balance of trade (2200 UAE Time), Canada’s S&P Global composite (1830 UAE Time) and S&P Global services PMI (1830 UAE Time), as well as US S&P Global composite PMI (1845 UAE Time), S&P Global services PMI (1845 UAE Time) and factory orders (1900 UAE Time).