U.S. ten-year yields, at 4.67%, were down about 1% on Friday; However, yields rose almost 1% to end the week higher, while US 2-year yields, at 4.99%, rose almost a basis point for the week but fell by almost a basis point on Friday.
The US dollar index closed with a gain of almost half a percent at 106.07 on Friday, and was flat on a weekly basis.
Data collection
The S&P Global Flash Composite Index for April (April) manufacturing and services output was noted at 50.90 versus the forecast of 52. This was the lowest reading since August. The employment measure slipped 3.20 points to 48, the lowest reading in about four years due to shrinking service payrolls and slowing growth in the manufacturing sector. S&P’s global manufacturing PMI contracted unexpectedly from the forecast of 52. New home sales data (March) came in at 693,000, which beat the forecast of 668,000 ; however, February data was revised downward.
U.S. Durable Goods Orders data (March) was mixed, with March data beating forecasts but previous data revised downward. US GDP for the first quarter of 2024 was noted at 1.6% quarter-on-quarter, which was lower than estimates of 2.5% and well below the 3.4% for the fourth quarter of 2023. However, the index of Price basis personal consumption expenditures (PCE) jumped 3.7%, beating the 3.4% estimate and up sharply from previous data of 2%. The weekly jobs report was a little better than expected.
US data released on Friday showed personal income (March) at 0.50% was in line with forecasts, while personal spending at 0.80% was better than the expected figure of 0.60%. The PCE CPI deflator (March) stood at 0.30% month-on-month (forecast 0.30) and 2.70% year-on-year compared to the forecast of 2.70%, while the deflator of Basis PCE month-on-month at 0.30% was in line with forecasts, but year-on-year at 2.80% beat the estimate of 2.70. %. Higher than expected figures showed once again that US inflation is proving persistent.
Gold request
Total known global gold ETF holdings fell for the third consecutive time on April 25, bringing the total holdings level to 81.157 MOz. According to the China Gold Association, China’s gold consumption increased 5.94% year-on-year to around 308.90 tonnes in the first quarter, as demand for gold bars and coins increased. significantly increased.
Domestic gold prices in India continue to trade at a discount to international prices due to sluggish demand due to high prices, especially for jewelry.
Big events next week
The most important event next week is the US Fed’s FOMC, the results of which will be known on May 1. Other events include US employment developments in ADP (April), JOLT job openings (March), ISM manufacturing (April), unit labor costs (april). 1Q preliminary), factory orders (March), ISM services (April) and non-farm payroll (April). Outside Europe, the focus will be on the UK Services PMI (April final) and the UK Manufacturing PMI; Eurozone CPI (April), unemployment rate (April), manufacturing and services PMI; and Germany’s CPI (April) and 1Q GDP. China is expected to release its manufacturing and services PMI at the end of the month.
Probability of the Fed’s position
Markets are now expecting rate cuts of 1-2 weeks starting in November, in stark contrast to the 6-7 weeks seen a few weeks ago. Declining odds of multiple rate cuts could weigh on the metal.
Geopolitics
Although the geopolitical situation remains tense as traders monitor signs of escalation in the Iran-Israel conflict, it is largely contained, which is negative for the yellow metal. Israel’s decision regarding Rafah remains in focus.
Weekly Outlook
Gold is expected to fall further next week as the US Federal Reserve is expected to impose a hawkish pause at its FOMC meeting on May 1.
US Treasury yields are somewhat stable as US inflation data has not been as high as feared; However, Treasuries are vulnerable as markets rethink the possibilities for rate cuts this year. US ten-year yields could rise to 5%. US ISM data on manufacturing and services will also be crucial. Unexpected weakness in US PMIs could support gold.
Support is seen at $2,290/$2,265/$2,250, while resistance is at $2,350/$2,365/$2,400.
(The author is Associate Vice President, Fundamental Currencies and Commodities at Sharekhan by BNP Paribas)
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