The price of spot gold increased by 0.46% on Friday, closing at $2,013. However, it suffered a weekly loss of nearly 0.50%, marking its second consecutive weekly decline. This occurred as ten-year US yields rose by 2.50% and the US Dollar Index increased by 0.15% to close at 104.28.
Inflation could become a focal point as the US PPI data released on Friday exceeded expectations, with the core PPI surging 0.5% and the PPI excluding food, energy, and trade services rising 0.6%. This increase in inflation data was driven by a significant rise in final demand services. However, housing starts experienced a decline in January, suggesting some mixed economic data.
Although there is some pessimism regarding inflation due to the bearish implications of the CPI and PPI inflation data, weak US retail sales and housing starts data have mitigated these concerns to some extent. Nonetheless, markets are becoming cautious about the potential impact of the PCE deflator inflation data.
In addition, investment demand for gold remains lackluster, as evidenced by outflows from global gold ETFs and low gold jewelry demand in India.
Looking ahead, investors will turn their attention to FOMC minutes, services and manufacturing PMIs, and other key economic indicators next week. Geopolitical tensions, particularly in the Middle East, and mixed comments from Fed officials may also impact market sentiment.
The overall outlook for gold remains vulnerable, as it is yet to experience a major trigger to support sustained price increases in the absence of early and significant rate cuts. In the coming days, support for gold is projected at $1984/$1965, with resistance at $2032/$2050/$2065.
It is also noteworthy that China’s wholesale gold demand saw a significant increase in January, and this could influence gold prices to some extent. Additionally, future actions by China’s Central Bank and ongoing geopolitical tensions could also impact gold prices. Therefore, it is important for investors to keep a close watch on developments in these areas.
