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What’s happening: Gold prices moved higher on Wednesday, amid easing US Treasury yields.
What happened: The US dollar came under pressure, lending support to its competing safe-haven assets, including gold.
However, one of the most widely traded metals recorded losses during Wednesday’s session as investors assessed recent economic reports.
Why it matters: Gold prices had jumped to record highs of $2,135.40 on Monday on growing speculations of interest rate cuts by the US Federal Reserve. The yellow metal retreated on Tuesday, losing more than $100 on some profit taking and uncertainties around the timing of the Fed’s rate cuts.
Lower interest rates reduce the opportunity cost of holding non-interest-yielding assets, like gold, while pressure on the US dollar makes the yellow metal cheaper for foreign currency holders, triggering increased demand.
Data released late Tuesday showed job openings in the US declining to more than a two-and-a-half year low in October, signalling that the Fed’s monetary tightening had negatively impacted the demand for workers. US private businesses added 103,000 jobs in November, below market estimates of 130,000.
Global geopolitical concerns have also sent gold prices on an upward trajectory. The decline in US Treasury yields on Wednesday to more than a three-month low lent further support to gold.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell earlier during the session, but closed slightly higher at 104.15 on Wednesday.
Gold for February delivery gained $11.60 to close at $2,047.90 per ounce on Wednesday. However, silver for March delivery declined by 32 cents to $24.23 per ounce and March copper lost 5 cents to $3.73 per pound. Platinum settled at $893.7, while palladium rose to $950.70 during Wednesday’s session.
What to watch: Investors await the release of the US NFP (non-farm payrolls) report on Friday. The US economy, which added 150,000 jobs in October, is expected to add 160,000 jobs in November. Analysts expect the US unemployment rate to remain unchanged at 3.9%.
Markets will continue monitoring geopolitical conditions, which is expected to play a major role in the movement of gold prices ahead.
Context: Germany’s benchmark index surged to a record high on Wednesday, as investors assessed recent economic data.
Details: A dovish stance taken by a member of the European Central Bank’s executive board, Isabel Schnabel, fuelled speculations of rate cuts next year and lent support to the European equity markets.
Data released on Wednesday showed an unexpected decline in Germany’s industrial orders in October, which reinforced speculations of rate cuts by the ECB in 2024.
Factory orders in Germany fell 3.7% month-over-month in October, compared to a 0.7% increase in September. The figure also came in much below market estimates of 0.2% growth. The HCOB Germany construction PMI, meanwhile, declined to 36.2 in November, the lowest reading since April 2020, and down from October’s 38.3.
A decline in Eurozone government bond yields also triggered more purchases of German stocks on Wednesday.
On the corporate front, shares of TUI jumped more than 15% on Wednesday, after the German tourism company projected a 25% spike in its operating profits this year. Ocado Group’s shares gained around 2.3% after JPMorgan analysts upgraded their rating from Underweight to Neutral.
Germany’s DAX 40 climbed 0.75% to a new record high of 16,656.44 on Wednesday. The STOXX Europe 600 Index gained 0.52% to settle at 470.06.
What to watch: Investors await the release of industrial production data from Germany today. The country’s industrial production had contracted by 1.4% in September but is expected to expand by 0.4% in October.
Data on Eurozone’s GDP growth and employment change will also remain in focus today.
Other Markets: US trading indices closed lower on Wednesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.19%, 0.39% and 0.56%, respectively.
The UK disclosed 46 new measures against people and groups for their involvement in supplying equipment and parts to the Russian military. The news sent the RUB/USD forex pair slightly lower this morning.
The Philippines announced a sharp easing in its manufacturing production growth to 1.3% year-over-year in October, from 9.6% in September, exerting pressure on the PHP/USD forex pair.
Australia recorded a trade surplus on goods of A$7.13 billion in October, below market estimates of A$7.5 billion, which sent the AUD/USD pair lower in forex trading this morning.
Japan’s foreign reserve assets climbed to $1.270 trillion in November, from $1.238 trillion in the previous month. This being the highest level since August 2022 lent support to the JPY/USD forex pair.
The EIA (Energy Information Administration) said that US crude inventories had contracted 4.632 million barrels in the week ending December 1, 2023, more than market estimates of a decline of 1.354 million barrels. The news sent the WTI crude oil prices higher this morning.
Saudi Arabia’s GDP growth rate, South Africa’s foreign exchange reserves and current account, UK’s house price index, France’s balance of trade, current account and foreign exchange reserves, Italy’s industrial production and value of retail sales, Singapore’s foreign exchange reserves, Turkey’s gross foreign exchange reserves and treasury cash balance, Mexico’s inflation rate, US Challenger job cuts, initial jobless claims, continuing jobless claims, wholesale inventories, natural gas stocks change, Manheim used vehicle value index and consumer credit, Russia’s foreign exchange reserves, Canada’s value of building permits, China’s foreign exchange reserves, Brazil’s car production and new vehicle sales, as well as Argentina’s industrial production.
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