Gold: Recovers on the US PPI data but remains vulnerable
Gold Performance:
On January 14, spot gold traded between $2,659 and $2,676. The metal, at the time of writing this report, was changing hands at $2,669, up around 0.20 per cent on the day, as it recovered on softer-than-expected US PPI data (December).
The MCX February gold contract at Rs 78,135 was down around 0.04 per cent.
Data roundup:
The US wholesale inflation, surprisingly, eased in December on lower food costs and flat services. The PPI final demand was up 0.2 per cent M-o-M (forecast 0.4 per cent) after rising 0.4 per cent in November. The overall PPI was up 3.3 per cent Y-o-Y (prior 3 per cent) as core PPI rose 3.5 per cent Y-o-Y (prior 3.5 per cent) -- both the readings were at their highest since February 2023. The readings, however, trailed their respective forecasts of 3.5 per cent and 3.8 per cent.
Food prices declined 0.1 per cent as overall goods prices rose 0.6 per cent following a rise of 0.7 per cent in November. Core goods prices were steady.
Chinese economic woes - China's new loans posted the first decline since 2011 last year on weak demand as financial institutions offered 18.09 trillion yuan ($2.47 trillion) of new loans in 2024 as compared with a median forecast of 17.87 trillion Yuan. New Yuan loan volume stood at 22.75 trillion Yuan in 2023.
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Upcoming data:
Today, we have the crucial data of the US CPI (December) on the cards. Traders will also monitor the UK's CPI and PPI (December) as the UK's economy is going through a rough patch on high inflation and anaemic growth amid surging borrowing costs. Germany's 2024 GDP Y-o-Y (2024) will also be on traders' radar.
Gold ETF:
Total known global gold ETF holdings stood at 83.18 MOz as on January 13, the highest level since December 26, as holdings were up for the fifth straight day.
US Dollar Index and yields:
Notwithstanding softer-than-expected US PPI data, the ten-year US yields rose to 4.804 per cent and were seen at 4.79 per cent at the time of writing this report as bond traders are cautious ahead of the US CPI report.
The US Dollar Index at 109.39 was down around 0.6 per cent on the day on gradual tariff possibility and the PPI data.
Geopolitics:
Trump and Biden both expressed optimism over a possibility of a ceasefire between Israel and Hamas. Both said that a ceasefire could be agreed within days.
Kitco news top metal 2025 survey:
As per this survey, 51 per cent of the respondents see gold as the top performer this year. Around 36 per cent see silver emerging as the winner, while nearly 8 per cent favour copper, and the 5 per cent remaining see platinum or palladium as the best performer.
Gold Outlook:
Gold is expected to range trade ahead of the US CPI report. Subdued Dollar Index and softer-than-expected US PPI data are somewhat positive for the metal; however, extrapolating PPI data to CPI data maybe erroneous. China's economic issues are also positive for the metal. Nonetheless, robust nonfarm payroll report and tariff concerns are likely to keep upside capped. Outlook is still mildly bearish. Support is at $2,645 (Rs 77,400)/$2,634 (Rs 77,100)/$2,615 (Rs 76,500). Resistance is at $2,684/$2,700.
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Disclaimer: This article is by Praveen Singh, associate VP, fundamental currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.