Gold prices are holding near the 100-day moving average. This week will see the New Year's holiday; PMI data will be a key focus.
Spot gold closed down 0.48% on Friday (December 30), settling at $2620.96 an ounce, barely holding above the 100-day moving average of $2616.01, as rising US Treasury yields weakened the appeal of non-yielding gold in thin holiday trading. The market is focusing on President-elect Trump's return and the potential impact of his inflationary stimulus policies on the Fed's outlook to 2025.
Time:
2024-12-30 08:18
Huitong Finance APP News - Spot gold closed down 0.48% on Friday (December 30), closing at $2620.96 per ounce, barely holding above the 100-day moving average of $2616.01, as rising US Treasury yields weakened the appeal of non-yielding gold in thin holiday trading. The market is focusing on President-elect Trump's return and the potential impact of his inflationary stimulus policies on the Fed's outlook to 2025.
“Treasury yields are now slightly higher, and gold will remain under pressure in the short term...holiday market trading is thin,” said Bob Haberkorn, senior market strategist at RJOFutures.
The US 10-year Treasury yield surged on Friday, with a sell-off in the stock market. Trading was quiet last week, with trading hours shortened due to the holidays. Investors are awaiting this week's jobless claims data for clues on the economic outlook for the new year.
Data released by the US Census Bureau on Friday showed that retailer inventories in November increased by 0.3% to $8,275 billion from $8,254 billion the previous month. Wholesaler inventories fell 0.2% to $9,016 billion from $9,038 billion in October. Treasury yields were little changed after the release of the business inventory data.
Another factor in Friday's Treasury trading was the sell-off in US stocks, said Jack McIntyre, global fixed income portfolio manager at asset management firm Brandywine Global Investment Management.
The Dow Jones Industrial Average closed down 0.74% on Friday, and the S&P 500 index fell 1.08% on Friday.
“This represents a potential wealth transfer effect,” McIntyre said. “This could alter people's economic outlook. A more pessimistic economic outlook could in turn affect people's appetite for Treasuries.”
The US 10-year Treasury yield rose 1.2 basis points on Friday from Thursday's close to 4.596%. The yield hit a high of 4.641% on Thursday, the highest since May 2, before falling back after a strong seven-year Treasury auction in the afternoon.
Based on the term structure of federal funds futures, traders see a negligible chance of the Fed easing policy at its January meeting. The Fed made its third rate cut earlier this month since shifting to a more accommodative stance in September.
Traders don't expect another rate cut before May, and see less than a 50% chance of a second 25 basis point rate cut before the end of next year, according to data from the London Stock Exchange Group (LSEG).
With the New Year's holiday this week, market trading is likely to be relatively light. Data to be released include November pending home sales on December 30 and the S&P Case-Shiller home price index on December 31. The latest initial jobless claims data will be released on January 2 after the New Year's holiday. In addition, the EU and US will release the final SPGI manufacturing PMI, and China's official manufacturing PMI data for December will be released on Tuesday, which investors need to pay attention to.
Although last Friday US Dollar Index fell slightly by 0.06%, closing at 108.02, but the weekly line still rose for the fourth consecutive week, which also reduced the attractiveness of gold to holders of other currencies. On December 20, the US dollar index reached its highest point in two years at 108.54, and is expected to rise 6.6% for the year.
Gold has surged 28% so far this year, hitting a record high of $2790.15 on October 31. The Fed's rate-cutting cycle and escalating global tensions have fueled the rally.
Although the Fed is now expected to reduce the number of rate cuts, most analysts remain bullish on gold's outlook for 2025.
They believe that geopolitical tensions around the world will continue to escalate, central banks will continue to buy gold heavily, and political uncertainty will linger as Trump returns to the White House in January.
His proposed tariffs and protectionist policies are also expected to trigger potential trade wars, increasing the appeal of gold as a safe-haven asset.
This week, the focus for gold prices is on the 2600-2641.45 range, the latter being the 21-day moving average. A breakout from this range is expected to provide guidance for further price movements.
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