Gold recovers but ends lower on the weekly basis
Spot gold, aided by geopolitical tensions and a weaker Dollar, extended its recovery to the fourth straight day on Friday as it closed 0.35% higher at $2650. However, the metal, despite the recovery, couldn’t shake off the weekly loss and was down around 2.3% on the week. Heavy losses due to a vicious sell-off on November 25, in the wake of the President-elect Trump announcing Scott Bessent as the incoming Treasury Secretary, turned out to be too deep to be recovered in the week.
Gold traded in the range of $2605 (November 26) and $2721 (November 25) in the week ended November 29.
Geopolitics
In response to continued Ukrainian attacks on Russia with ATACMS missiles, Russia attacked power infrastructure of Kyiv with missiles and drones on November 29 and warned that it can use nuclear-capable ballistic missiles to attack decision-centres in Kyiv.
Talks of the West arming Ukraine with nuclear weapons is worsening the geopolitical scenario; thus, increasing the possibility of Russia using tactical nuclear weapons, though the US is sceptical of Russia taking such a drastic step.
Meanwhile, accusing Hezbollah of violating ceasefire deal, Israel struck on its targets in Southern Lebanon.Heightened geopolitical tensions continue to dominate gold trading.
Data roundup
The Euro-zone’s CPI rose 2.3% y-o-y, up from 2% in October, and was in line with the forecast. The pickup in inflation was driven by energy base effects and elevated services cost.Canadian economy grew 0.1% in October as compared to a forecast of 0%; however, it trailed the forecast of 0.3% growth. The 3Q GDP annualised growth rate at 1% fell short of the estimate of 1.1%.France’s GDP (3Q final) grew 1.2% y-o-y, trailing the forecast of 1.3%.
India’s GDP grew 5.4% in the three months to September from a year earlier, which is the worst reading since the Q4 of 2022; it was lower than the central bank’s projection of 7% for the period.
The US CPI data (October) were in line with the forecasts, though some of the readings showed a pickup in inflation due to jump in core services inflation. PCE price index was up 2.8% y-o-y (prior reading 2.70%) and PCE price Index was up 2.3% y-o-y from 2.1% in September. Real consumer spending (October) at 0.1% trailed the forecast of 0.2%; however, the September reading was revised higher. Third quarter annualized GDP at 2.8% matched the forecast. Continuing claims remained at a 3-year high.
Germany’s CPI (November prel.) came in at 2.2% y-o-y (forecast 2.3%) and -0.2% m-o-m (forecast -0.7%), whereas the Euro-zone’s consumer confidence (November final) at 5.3 trailed the forecast of 6.5.
Upcoming data
The next week is packed with crucial data as US ISM manufacturing, ISM services and nonfarm payroll data are on the card. Focus will be on PMIs of the economies like Japan, China, the Eurozone and the UK also. China’s data will be of particular interest to traders as it would reflect the effectiveness of the recent stimulus measures.
US Dollar Index and yields
The US yields fell sharply on month-end buying and geopolitical worries. The US Dollar Index fell after rising for eight consecutive weeks. It closed at 105.74 and was down around 1.75% on the week. The ten-year US yields at 4.18% on Friday, were down over 5% on the week; the two-year yields at 4.16%, were also down over 5% on the week.
ETF:
Total known global gold ETF holdings stood at 83.166MOz, higher than the prior week’s level of 83.093Moz, as on November 28.
Gold-copper ratio:
The ratio reached the GFC 2008 high on mounting worries about the global economy.
China’s gold market
According to a report from Chinese media outlet Yicai Global, a number of Chinese commercial banks have reclassified physical gold as ‘higher risk’ to protect risk averse clients from huge volatility in gold prices.
Outlook
Spot gold is caught between safe haven demand and risk-on trading as traders look forward to the incoming President Trump’s economic policies. The US yields have slumped on a possibility of deficit reduction. At the same time, possible trade frictions also support the metal.
Gold is reacting sharply to the headlines concerning the Russia-Ukraine war; however, upside is getting capped as geopolitical risks, despite being elevated, are still being perceived as contained by traders. Nonetheless, as the possibility of the situation turning grave is not really non-existent, buying the dips is preferred. Strong US data and contained geopolitical risks may weigh heavily on the metal in the near term though.
The metal is seen trading largely between $2600 and $2700 in the short term. Support is at $2630/$2600/$2565. Resistance is at $2665/$2700/$2720.
(The author is Associate Vice President, Fundamental Currencies and Commodities, Mirae Asset at Sharekhan)
(Disclaimer: This is an AI-generated article. Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)