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Trends & Analysis
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Gold down on profit taking after a strong 2023

Thursday, January 04, 2024

Today’s headlines

What’s happening: Gold prices declined by more than 1% on Wednesday amid strength in the US dollar.

What happened: The safe-haven metal came under pressure during Wednesday’s session despite entering 2024 on a strong note.

However, the outlook for gold remains strong due to prospects of rate cuts by the US Federal Reserve this year.

Why it matters: Gold remained on a steep uptrend through most of last year, adding around 13% in 2023, which represents its first yearly surge since 2020. Markets are optimistic about the yellow metal reaching fresh highs this year as major central banks are expected to cut interest rates.

Traders widely expect the US Federal Reserve to lower its benchmark interest rate by 25 basis points at the March meeting.

Traders remained cautious at the start of the session on Wednesday, ahead of the release of minutes from the Fed’s latest policy meeting. Fed officials reiterated that interest rates could be lowered this year but offered no indication of the timing of the cuts.

Markets also assessed some key economic reports from the US. The number of job openings in the country declined by 62,000 to 8.790 million in November, the weakest reading since March 2021. The ISM manufacturing PMI for the US edged higher to 47.4 in December, from November’s reading of 46.7. Yet, the reading signalled the 14th straight month of contraction in factory activity.

Strength in the greenback exerted pressure on gold, as this makes US dollar-priced metals more expensive for foreign buyers. The US dollar index, which measures the greenback’s performance versus a basket of major peers, added around 0.3% to reach 102.49 on Wednesday.

Gold for February delivery tumbled $30.60 to close at $2,042.80 per ounce on Wednesday.

In other metal trading, silver for March delivery declined 79 cents to $23.16 per ounce, while March copper lost 2 cents to $3.86 per pound, platinum fell to $987.1 and palladium settled lower at $1,071.10.

What to watch: Investors await the release of jobs data from the US on Friday. The US economy, which added 199,000 jobs in November, is expected to record 150,000 job adds in December. Analysts expect the unemployment rate in the US to rise to 3.9% in December, from 3.7% in November.

Markets will also monitor the ongoing geopolitical tensions, which had sent gold sharply higher in 2023.

The markets today

UK stocks will be in focus today ahead of a basket of major economic reports

Context: London stocks closed lower on Wednesday, with the blue-chip FTSE 100 index declining to its weakest in two weeks.

Details: UK stocks came under pressure on Wednesday, amid an increase in bond yields and a plunge in mining and personal goods shares.

The yield on the UK 10-year benchmark note rose for the fourth straight session on Wednesday. Shares of precious metal miners fell about 2.7%, while stocks of heavyweight industrial metal miners tumbled around 2.6%, as strength in the US dollar exerted pressure on global metal prices.

The personal goods index lost around 2.8% on Wednesday, after Burberry’s shares tanked 3% following a downgrade in rating by Stifel. Shares of Entain Plc also edged lower after Ricky Sandler was named as a non-executive director.

The FTSE 100 index fell 0.51% to close at 7,682.33 on Wednesday, while the midcap FTSE 250 index lost 0.95% to settle at 19,326.40, recording its biggest single-session plunge in over a month.

What to watch: Investors await the release of economic data on money supply M4, services PMI and composite PMI from the UK today. M4 money supply in the UK, which rose by 0.3% to £2.989 trillion in October, is expected to increase by 0.1% in November.

Analysts expect the S&P Global/CIPS UK services PMI to increase to 53.7 in December, from 50.9 in the prior month, while composite PMI is projected to rise to 51.7 in December, from 50.7 a month ago.

Other Markets: US trading indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.76%, 0.80% and 1.06%, respectively.

The news shaping the markets

Russia accidentally bombed one of its own villages near Ukraine. The news sent the RUB/USD forex pair slightly lower this morning.


Ireland’s AIB services PMI fell to 53.2 in December, from 54.2 in November. However, services activity still remained in the expansion zone, lending support to the EUR/USD forex pair.


Singapore’s S&P Global PMI fell to 55.7 in December, from a 12-month high of 55.8 in November, which sent the SGD/USD pair lower in forex trading this morning.


Japan’s au Jibun Bank manufacturing PMI was revised higher to 47.9 for December, versus a flash reading of 47.7. However, the latest reading still represented a decline from November’s 48.3 and exerted pressure on the JPY/USD forex pair.


Australia’s Judo Bank composite PMI rose to 46.9 in December, from 46.2 a month ago, which sent the AUD/USD pair higher in forex trading this morning.

What else to watch today

South Africa’s S&P Global PMI, France’s inflation rate, new passenger car registrations, services PMI and composite PMI, Spain’s services PMI and composite PMI, Italy’s services PMI and composite PMI, Germany’s consumer price inflation, services PMI and composite PMI, Eurozone’s services PMI and composite PMI, UK’s consumer credit, mortgage approvals, mortgage lending and net lending to individuals, Brazil’s value of outstanding loans, producer prices, services PMI and composite PMI, US Challenger job cuts, ADP Employment change, initial jobless claims, continuing jobless claims, services PMI, composite PMI, Logistics Manager’s Index, natural gas stocks change, crude oil inventories, gasoline stocks change and distillate inventories, Canada’s services PMI and composite PMI, as well as Türkiye total vehicle sales.


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