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Gold settles at new high, records 2nd weekly gain

 

Monday, March 04, 2024

Today’s headlines

What’s happening: Gold moved higher on Friday, with prices surging to a record high amid geopolitical tensions.

What happened: Gold started the new month on a strong note, after muted economic reports increased prospects of delays in interest rate cuts by central banks.

The rise in gold prices on Monday helped the safe-haven metal to record gains for the second straight week backed by weakness in the US dollar.

Why it matters: Data released on Friday showed US manufacturing activity shrinking for the 16th straight month in February. The ISM manufacturing PMI dipped to 47.8 in February, from 49.1 in the prior month. The figure not only represented another month of contraction in US manufacturing activity, but also missing market estimates of 49.5.

The final reading of the University of Michigan consumer sentiment also came in below expectations. US construction spending declined by 0.2% in January, after a 1.1% surge in the earlier month. The figure missed market expectations for a 0.2% rise.

Other data released on Thursday showed that the annual rise in US inflation rate in January was the lowest in around three years. Weakness in the US economy has a trickle-down effect on countries around the globe. Heightened economic uncertainties typically lend support to safe-havens like gold.

The soft economic data also fuelled speculations of the US Federal Reserve delaying its decision to cut interest rates to June. The US dollar moved lower following the release of lower-than-expected economic data. Weakness in the US dollar tends to support gold prices, as a lower greenback makes the dollar-denominated bullion cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.3% to 103.89 on Friday.

Physical demand for gold remained subdued in India during the week as inflation negatively impacted consumer sentiment, prompting delays in gold purchases.

Gold futures gained 2% to close at record level of $2,095.70 an ounce, surpassing the prior record high of $2,093.10 that was reached on December 27, 2023. The yellow metal notched a weekly gain of around 2.2%.

In other metals trading, Silver for May delivery gained 47 cents to $23.36 per ounce, May copper added 1 cent to $3.86 per pound, platinum rose to $888.00 and palladium surged to $962.50.

What to watch: Investors await the release of economic data on services PMI from the US and comments by Fed officials.

The markets today

European stocks will be in focus today ahead of major economic reports due this week

Context: European stock markets settled higher on Friday, with Germany’s DAX surging to a new all-time high during the session.

Details: Investor sentiment was supported by the release of inflation data from the US. Although the annualised US inflation rate rose in January, this marked the smallest rise in three years.

The personal consumption expenditures (PCE) price index rose 0.3%, while the data for December was revised lower to 0.1%, from the previously reported 0.2%. Inflation was kept in check by a decline in energy prices.

The S&P 500 settled at an all-time high on Friday, extending gains recorded in the previous session.

Data released on Friday showed inflation in the Eurozone easing to a three-month low of 2.6% year-over-year in February, although this came in slightly above market estimates of 2.5%.

Eurozone’s manufacturing PMI rose to 46.5 in February, from a preliminary reading of 46.1. The unemployment rate in the Eurozone fell to 6.4% in January, the lowest on record.

The European Central Bank is scheduled to announce its policy decision on Thursday, with markets expecting the central bank to keep rates unchanged at 4.5% during the meeting.

The STOXX Europe 600 Index gained 0.60% to reach a record high of 497.58 on Friday, while Eurozone’s Stoxx 50 rose 0.35% to a 23-year high of 4,894.86.

London’s FTSE 100 climbed 0.69% to close at 7,682.50 on Friday. Germany’s DAX 40 rose 0.32% to 17,735.07, while France’s CAC 40 added 0.09% to settle at 7,934.17.

What to watch: With no major economic data scheduled to be released on Monday, investors await the reports on services PMI, composite PMI and PPI on Tuesday. The HCOB flash Eurozone services PMI is expected to rise to 50 in February, from 48.4 in January, while the composite PMI is projected to increase to 48.9 in February, from 47.9 a month ago.

Analysts expect industrial producer prices in the Eurozone to increase by 0.4% in January, after a 0.8% decline in December. Data on GDP growth rate and retail sales will also be released during the week.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.23%, 0.80% and 1.44%, respectively.

The news shaping the markets

Ukraine announced a drone attack on the Russian occupied Crimean peninsula on Sunday. The news sent the RUB/USD pair slightly lower in forex trading this morning.


South Korea’s S&P Global manufacturing PMI fell to 50.7 in February, from 51.2 in the prior month. Despite the decline, the country’s factory activity remaining in the expansion zone for the second straight month lent support to the KRW/USD forex pair.


Australia’s corporate profits rose by 7.4% in the fourth quarter, easily topping market expectations of 1.8% growth, which sent the AUD/USD pair higher in forex trading this morning.


New Zealand’s merchandise (goods) terms of trade declined by 7.8% in the fourth quarter. This being steeper than the 0.6% decline recorded in the prior quarter exerted pressure on the NZD/USD forex pair.


Colombia’s Davivienda manufacturing PMI fell to 51.2 in February, from 55.1 in the previous month, which sent the COP/USD pair lower in forex trading this morning.

What else to watch today

Türkiye’s consumer prices, Producer price inflation, balance of trade, exports, imports and total vehicle sales, France’s new passenger car registrations and government budget value, Brazil IPC-Fipe inflation and Central Bank of Brazil’s focus market readout, Spain’s unemployment change and number of foreign tourist arrivals, as well as Mexico’s gross fixed investment.


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