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Germanys preliminary composite PMI for August was 50.9, in line with expectations of 50.2 and the previous value of 50.6.Germanys preliminary services PMI for August was 50.1, in line with expectations of 50.3 and the previous value of 50.6.Germanys preliminary manufacturing PMI for August was 49.9, in line with expectations of 48.8 and the previous value of 49.1.On August 21st, Ukrainian President Volodymyr Zelensky announced that he had discussed security guarantees with US President Trumps team and confirmed the US delegation for the talks. Zelensky stated that he hoped to finalize the security guarantee framework within seven to ten days, preferably before his meeting with Putin. Regarding possible locations for the Ukrainian-Russian summit, Zelensky stated that Ukraine believes a neutral European country, such as Switzerland or Austria, is the right choice, and Turkey is not ruled out. However, this is unacceptable to Moscow, and Budapest is currently unrealistic.On August 21, Jonas Feldhusen, an economist at Hamburger Commerzbank, reported that Frances composite PMI remained below the growth threshold in August, reaffirming the persistent economic weakness that has persisted this year. While the index showed a slight improvement from the previous month, no clear turning point has emerged. On a slightly positive note, the contraction in both the manufacturing and services sectors slowed, which can be cautiously viewed as an early sign of stabilization. The services sector reflects broader economic conditions. Business activity continues to lack momentum. Current order book conditions, particularly the significant deterioration in overseas demand in August, make any hopes for a short-term recovery very slim. Service providers remain cautious about the future. The manufacturing sector remains under significant pressure. Long-term challenges such as weakening international competitiveness and rising protectionism are creating a difficult environment. Global supply chains may still be adjusting to the new tariff system, which may contribute to the significantly longer delivery times. While the sharp decline in orders seen last month was not repeated in August, manufacturer sentiment showed little improvement.

Forecast for the Gold Price: XAU/USD bulls require confirmation from $1,902 and US inflation projections

Daniel Rogers

Jan 13, 2023 14:48

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Gold price (XAU/USD) is stable at $1,900 as bulls take a breather near the eight-month high early Friday morning, following the US inflation-inspired advance. In doing so, gold also reflects the market's skepticism ahead of additional data on US inflation conditions and consumer morale. In addition, recent concerns regarding US-China relations present additional obstacles for XAU/USD buyers.

 

According to anonymous sources cited by Reuters, the White House will discuss the recent ban on exports of chip-making gear to China during planned trips with Japanese and Dutch officials. The story also mentions that the White House Officials will not result in "immediate" commitments from China and Russia to implement comparable restrictions. The news renews the geopolitical conflict between the United States and China and supports the price of gold.

 

In a similar vein, the atmosphere before to China's trade data for December and the initial readings of the US Michigan Consumer Sentiment Index (CSI) for January will be crucial for short-term direction. In addition, the US 5-year Consumer Inflation Expectations will be crucial.

 

Even though Wall Street closed with gains, S&P 500 Futures remain hesitant and 10-year US Treasury rates lick their wounds near 3.46 percent as of press time.

 

On Thursday, the US CPI matched predictions for December at 6.5% YoY, compared to 7.1% before. Moreover, CPI excluding food and energy confirmed the market consensus of 5.7% YoY, compared to previous readings of 6.0%. Notable is the fact that the CPI MoM marked its first negative result since June 2020 with a -0.1% figure for the specified month, compared to the 0.0% anticipated and 0.1% prior figure.

 

Following the release of the US CPI, the Fed Fund Futures pegged to the policy rate implied a nearly 100 percent possibility of a 0.25 basis point (bps) Fed rate hike in February, but the odds favoring a 50 basis point (bps) rate hike in the same month fell to 8.0%.

 

Patrick Harker, president of the Federal Reserve Bank of Philadelphia, was the first to signal easy rate hikes after the US CPI, which weighed on the US Dollar. Thomas Barkin, president of the Federal Reserve Bank of Richmond, stated in the same vein that it "makes sense" for the Fed to steer more cautiously in its efforts to reduce inflation. However, the president of the Federal Reserve Bank of St. Louis, James Bullard, stated that the most likely scenario is for inflation to remain above 2%, therefore the policy rate will need to be elevated for a longer period of time.

 

In the future, expected growth in China's trade reports for December should benefit gold purchasers, while expected improvement in US consumer confidence measures could test the XAU/upward USD's potential. Notably, the US 5-year Consumer Inflation Expectations will be essential to monitor.


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