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What’s happening: Gold prices settled higher on Friday, but recorded losses for the week.
What happened: The US released hotter-than-expected inflation data last week, which further reduced prospects of an early rate cut by the US Federal Reserve.
Gains in the US dollar last week also exerted pressure on the safe-haven yellow metal.
Why it matters: Data released on Friday showed US producer prices rising more than projected for January. US producer prices gained 0.3% in the month, following a 0.1% decline in December, and compared to market expectations of a 0.1% increase.
Another report released earlier in the week showed a higher-than-expected rise in consumer prices last month. The annual inflation rate slowed to 3.1% in January, from 3.4% in December, but was above market views of 2.9%.
Although gold is viewed as a hedge against inflation, elevated interest rates have been negatively impacting the appeal for the non-yielding bullion.
According to the CME Fed Watch Tool, traders have pushed back their projections of a rate cut from March to June. President of the Federal Reserve Bank of Atlanta Raphael Bostic said last week that the central bank needs more time to consider prospects of rate cuts.
The US dollar fell slightly on Friday, lending support to gold. However, the US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.2% last week, leading to the yellow metal recording weekly losses. Strength in the greenback generally makes metals more expensive for foreign currency holders.
The physical demand for gold increased last week. Gold premiums in India climbed to an over four-month high due to a hike in demand from jewellers stocking up the yellow metal for the major wedding season.
US gold futures gained 0.5%, or $9.20, to close at $2024.1 an ounce, but declined around 0.7% for the week.
In other metals trading, silver for March delivery added 53 cents to $23.48 per ounce on Friday. March copper gained 8 cents to $3.84 per pound and platinum settled higher at $913.5, while palladium fell to $952.80.
What to watch: Investors will continue watching the Federal Reserve’s monetary policy. With the Fed unlikely to lower rates in March, gold prices are expected to struggle breaching the resistance level of $2,000.
The release of US data on manufacturing and services PMI, along with comments from Fed speakers, will also be in focus.
Context: European shares ended the week on a strong note as investors assessed major earnings reports.
Details: The STOXX Europe 600 Index surged to a new two-year high on Friday, amid a spike in miner stocks, which hit a two-week high. The pan-European index gained 0.62% to close at 491.59 on Friday, while the Euro STOXX 50 traded near its strongest level in 23 years.
Shares of Metso Corp gained around 9% on Friday, after the company reported better-than-expected fourth-quarter profits. NatWest’s shares climbed around 7% after the bank recorded upbeat profits for 2023.
On the economic data front, France’s annual inflation rate slowed to 3.1% in January, from 3.7% a month ago. Wholesale prices in Germany fell by 2.7% year-over-year in January.
London’s FTSE 100 gained 1.5% to settle at 491.59, climbing to a more than five-week high after UK’s retail sales came in higher than expected.
Germany’s DAX 40 and France’s CAC 40 added 0.42% and 0.52%, respectively, reaching another record high.
What to watch: With no major reports scheduled from the Eurozone today, investors await the release of economic data on current account and construction output on Tuesday. The Eurozone’s current account surplus is expected to widen to €45.0 billion in December, from €31.7 billion in November. Analysts expect construction output in the Eurozone to decline 2.3% year-over-year in December, after a 2.2% decline in November.
Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.37%, 0.48% and 0.90%.
Russia claimed full control of the Ukrainian town of Avdiivka following a retreat by Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.
Thailand’s economy unexpectedly contracted 0.6% in the fourth quarter. The figure missing market expectations for 0.1% growth exerted pressure on the THB/USD forex pair.
Japan’s core machinery orders increased 2.7% to ¥ 838.8 billion in December, after a 4.9% decline in November. The latest reading also topped market estimates of a 2.5% increase, sending the JPY/USD pair higher in forex trading this morning.
New Zealand’s BusinessNZ performance of services index rose to 52.1 in January, from 48.8 in the previous month. The recent reading represented the strongest growth in services activity in eight months and lent support to the NZD/USD forex pair.
China’s current account surplus narrowed to $55.2 billion in the fourth quarter, from $103.1 billion in the year-ago period, which sent the CNY/USD pair lower in forex trading this morning.
Spain’s balance of trade and consumer confidence indicator, Brazil IBC-Br economic activity index, industrial entrepreneur confidence index and Central Bank of Brazil’s focus market readout, as well as Canada’s producer price inflation and raw materials price index.
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