Gold ends with second straight weekly loss with US inflation concerns flaring up
The ten-year US yields at 4.308% were up 0.38% on the last trading day of the week; however, the yields surged nearly 5.50% on the weekly basis.
The metal was down over 1% on the week as it posted its second consecutive weekly loss. It closed 0.24% lower at $2156 Friday on hotter than expected US export price Index data (February).The ten-year at 4.308% were up 0.38% on the last trading day of the week; however, the yields surged nearly 5.50% on the weekly basis. The two-year yields at 4.73% were up around 6% on the week. Weak looking US Dollar Index, boosted by high readings, recovered to finish the week 0.70% up at 103.45. It closed 0.06% up Friday.
Data round-up
The latest US data have been mostly weaker than expected, but inflation readings have been mostly above the forecasts. University of Michigan sentiment data (March preliminary) released on Friday came in at 76.50 Vs the forecast of 77.10. Industrial production in February was noted at 0.10% vs the estimate of 0%; however, the prior data was revised lower to -0.50% from -0.10%. Although import price Indices matched their respective forecasts, export price Index m-o-m came in at 0.80% Vs the forecast of 0.40% and y-o-y reading at -1.80% was higher than the estimate of -2.40%, though University of Michigan one-year inflation expectations (March preliminary) at 3% was a touch lower than the estimate of 3.10%.Retail sales data trailed the forecast, though weekly job data were better than expected.
Underlying US inflation topped forecasts for a second month in a row. increased 0.40% from January (forecast 0.30%). US Core Consumer Price Index advanced 3.80% from a year ago Vs the forecast of 3.70%. US CPI y-o-y was 3.20% Vs the forecast of 3.10%.
Geopolitical watch
Geopolitical tensions continue to simmer. Israeli Prime Minister Netanyahu on Friday rejected the latest cease-fire deal proposed by Hamas and called its demands ludicrous. He said that Israel would move forward with its plans for a ground offensive in Rafah as he sees the city as one of the last major strongholds of Hamas, though he is open to more talks.G7 allies warned Iran against supplying missiles to Russia.
Physical and investing demand
Total known global ETF holdings fell for the fourth straight day on Thursday to 81.792 MOz, which is the lowest level since September 2019.China's paper the Securities Times has warned investors to be cautious chasing gold rally and has urged less experienced investors to consider products with higher liquidity such as gold ETFs and bank wealth management products.
Bitcoin ETFs may surpass gold's as per ETF experts.
Data next week
Next week's major US data on tap include NAHB housing Index ,housing starts (February), Philadelphia business outlook (March), S&P Global US PMIs (March preliminary), Leading Index (February) and existing home sales (February).Major European data include Euro-zone's CPI (February), ZEW Survey expectations (March), PMIs (March preliminary), and Germany's ZEW Survey Expectations (March), PMIs (March preliminary) and IFO Business climate (March).
Out of the UK, CPI (February), PMIs (March preliminary), retail sales (February) and Gfk consumer confidence data will be in focus.
China's major macroeconomic releases include retail sales (February), industrial production (February) and property investment (February).
Key central banks’ monetary policy decisions next week
Next week we have got monetary policy decisions of four key central banks lined up. The Bank of Japan's monetary policy decision is due on March 19, while the US Federal Reserve will deliver its decision on March 20. As wage negotiations in Japan have gone well, there is a high possibility that the Bank of Japan will hike rates to end the world's last negative rate regime, which can put upward pressure on the global yields, thus may be negative for gold.
The People's Bank of China is set to declare its monetary policy on March 20 and is expected to keep the 5-year and 1-year Loan prime rates unchanged.
The Bank of England will conclude its monetary policy meeting on March 21.
Weekly outlook:
The US Federal Reserve is expected to keep its benchmark Fed fund rate unchanged at 5.25%-5.50%; however, focus will be on clues to the timing and pace of rate cuts. Investors expect that despite sticky and somewhat unsettling inflation readings out of the US in the last two months, the Central Bank will cut rates three times this year. The Fed may try to push back against the markets' expectations of rate cuts due the recent inflation data. In that case gold will suffer.Gold is expected to trade with a slight negative bias at the start of the week on the US , though a lot will depend on the Fed's monetary policy decision thereafter.
Support is at $2135/$2095. Resistance is at $2170/$2195.
(The author is Associate Vice President, Fundamental Currencies and Commodities at Sharekhan by BNP Paribas)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
