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What’s happening: Gold prices moved higher on Monday amid some weakness in the US dollar.
What happened: The yellow metal hit a six-month high on continued geopolitical tensions and prospects of the US Federal Reserve announcing rate cuts soon.
Investors also digested some economic data releases from the world’s leading buyer of gold, China.
Why it matters: Gold extended gains on Monday, after having risen by $10.20 to $2,003 per ounce on Friday.
China reported a 7.8% year-on-year decline in the profits earned by industrial firms in the country in the first ten months of 2023. Although this was marginally better than the 9.0 % decline reported in the prior period, it highlighted China’s fragile economic recovery and lent support to safe-haven assets.
Recent economic reports signalled easing inflation in the US, which raised speculations of the Fed starting to lower interest rates soon.
While traders widely expect the Fed to keep interest rates unchanged at its December meeting, there are growing speculations of the central bank beginning to cut rates from May next year. Lower rates reduce the opportunity cost of holding non-interest-yielding assets, lending support to precious metals like gold.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, hovered near its three-month lows. Weakness in the US dollar generally makes greenback-denominated assets like gold less expensive for foreign currency holders. The US dollar index has lost around 3% in November.
Spot gold climbed to its strongest level since May 16 on Monday. Gold for December delivery gained $9.40 to close at $2,012.40 per ounce, while Silver for December delivery climbed 34 cents to $24.68 per ounce.
In other metals trading, March copper lost 3 cents to $3.80 per pound, while Platinum decline to $923.2 and palladium fell to $1,060.50 per ounce on Monday.
What to watch: Investors will watch the Fed’s interest rate decision in December and movement in the US dollar.
Markets will also await the release of major economic reports, including GDP and core PCE price index, the Federal Reserve’s preferred inflation measure, due this week from the US. The US economy is expected to grow an annualised rate of 4.9% in the third quarter, following a 2.1% expansion in the second quarter. The US core PCE price index, which rose by 3.7% year-on-year in September, is projected to rise by 3.5% in October.
Context: European shares closed lower on Monday amid weakness in healthcare stocks.
Details: European Central Bank President Christine Lagarde said the central bank’s fight to contain inflation is not over, as the outlook remains uncertain despite the recent easing in inflationary pressures.
“Looking ahead, we expect the weakening of inflationary pressures to continue, even though headline inflation may rise again slightly in the coming months, mainly owing to some base effects…However, the medium-term outlook for inflation remains surrounded by considerable uncertainty,” Lagarde said at a European Parliament hearing.
The STOXX Europe 600 Index fell 0.34% to close at 458.41 on Monday, with healthcare stocks shedding around 0.6%. The real estate sector bucked the overall market trend, adding around 1.2%.
Shares of Evotec and AstraZeneca closed lower on Monday after Jefferies analysts slashed price targets on the stocks.
UK’s FTSE 100 index settled lower by 0.37% at 7,460.70, extending last week’s decline. Germany’s DAX 40 and France’s CAC 40 fell 0.39% and 0.37%, respectively.
What to watch: Investors await the release of economic data on loans to private sector, household credit growth and money supply M3 from the Eurozone today. Loans to private sector, which rose by 0.2% year-over-year in September, is expected to decline by 0.2% in October. Analysts expect bank lending to households in the Eurozone to rise by 0.6% year-over-year in October, following a 0.8% gain a month ago. Money supply in the Eurozone, which fell 1.2% in September, is expected to decline by 1.3% in October.
The release of inflation data from Germany and Eurozone will also remain in focus this week.
Other Markets: US trading indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.16%, 0.20% and 0.13%, respectively.
Russian foreign minister Sergei Lavrov denied claims that Moscow has plans to expand in Europe. The news sent the safe-haven US dollar index slightly lower this morning.
Israel’s central bank held its policy rate at 4.75% in November, which exerted pressure on the ILS/USD forex pair.
Mexico’s trade deficit shrank to $252 million in October, from $2.089 billion in the year-ago period, sending the MXN/USD pair higher in forex trading this morning.
UK’s Confederation of British Industry’s monthly retail sales balance rose to -11 in November, from -36 in the prior month and lent support to the GBP/USD forex pair.
US reported that sales of new single-family houses had declined fell by 5.6% to an annualised rate of 679,000 in October. This came in below the consensus estimate of 723,000 and sent the Dow Jones index lower by more than 50 points on Monday.
Saudi Arabia’s unemployment rate, money supply M3 and value of loans, Germany’s GfK consumer climate indicator, France’s consumer confidence, Brazil’s mid-month inflation rate and Federal tax revenues, as well as US Redbook index, Case Shiller home price index, FHFA house price index, Richmond Fed manufacturing index, Dallas Fed general business activity index, and API crude oil stock change.
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