On Friday (December 13th), spot gold in the Asian market fluctuated narrowly in early trading, currently trading at $2680.80 per ounce. Gold fell more than 1% on Thursday due to investors taking profits after briefly touching a five week high of 2726 at the beginning of the session and closing their positions before next week's Federal Reserve meeting. After the US PPI data was stronger than expected, gold prices fell to 2675.08 at one point, closing at $2680.55 per ounce.

Market analyst Zain Vawda from MarketPulse by OANDA said, "Bulls maintain their recent momentum, but there may be a pullback before the Federal Reserve meeting as investors lock in profits." "After the meeting, the focus will shift to guidance on the January meeting and future policy direction, which is crucial for determining the sustainability of further market gains

Although the European Central Bank has lowered interest rates for the fourth time this year and opened the door to more loose policies; The Swiss National Bank has lowered interest rates by 50 basis points, marking its largest rate cut in nearly a decade. But all of these are basically in line with market expectations, and the US dollar provides further upward momentum for gold prices. Some investors took profits before the Federal Reserve's decision next week, as the bullish trend ran out.

Despite the rebound in initial jobless claims in the United States, the increase in producer prices in November exceeded expectations due to soaring food costs. The inflation data released on Wednesday showed that the consumer price increase in November was the largest in seven months. This data slightly suppressed the prospect of the Federal Reserve cutting interest rates, and the US dollar index and US Treasury yields continued to rise. It has further intensified the profit taking of gold bulls.

CME's FedWatch tool shows a 94% chance of a rate cut in December., Lower than the previous day's 98.6%.

In terms of geopolitical situation, US National Security Advisor Sullivan stated on Thursday that he believes an agreement regarding a ceasefire in Gaza and the release of hostages may be imminent, as Israel has indicated readiness and there are signs of action from Hamas. This has cooled down the market's concerns about the geopolitical situation.

There were relatively few economic data on this trading day, mainly focusing on the changes in the US import and export price index in November. In addition, investors need to continue to pay attention to the relevant news of the geopolitical situation and keep an eye on the latest developments related to Trump.

From a technical perspective, the gold price failed to break through the resistance near the high point of 2721 on November 25th and fell back after being blocked twice at that level. The short-term downside risk has increased, so pay attention to the support near the 55 day moving average of 2669.20 and the 21 day moving average of 2650. Pay attention to the resistance at the 2700 integer level above. If it can rebound above this level, it will weaken the short-term downside risk.

US producer prices hit their largest month on month increase in five months in November, but service sector inflation slows down

In November, producer prices in the United States saw their largest month on month increase in five months, but the decline in service prices such as investment portfolio management fees and airfare has brought hope that despite stagnant progress, the trend of slowing inflation continues.

The avian influenza epidemic has led to a sharp rise in egg prices, which is the main reason for higher than expected producer inflation in November. However, other details in the report released by the Department of Labor on Thursday were mostly positive, prompting economists to significantly lower their forecasts for the increase in the Personal Consumption Expenditures (PCE) price index. This is the inflation indicator favored by the Federal Reserve.

This report and other data show that as labor demand cools down, the number of people receiving unemployment benefits at the end of November has increased compared to the beginning of the year, consolidating investors' expectations that the Federal Reserve will cut interest rates for the third consecutive time next week.

However, if the incoming administration of US President elect Trump continues to push forward plans to increase tariffs and mass deport illegal immigrants, inflation may rise next year.

We hardly see evidence of brewing price pressures in producer price data, "said Samuel Tombs, Chief US Economist at Pantheon Macroeconomics. The foundation for further decline in core PCE inflation next year is already in place, but if the new government advances plans to increase import tariffs and expel immigrants, they will be at a loss when they approach victory

The US Bureau of Labor Statistics stated that the Producer Price Index (PPI) for final demand rose 0.4% month on month, the largest increase since June. Economists surveyed by Reuters had previously predicted a 0.2% increase, with October's increase revised up to 0.3%, from the previous 0.2%.

PPI increased by 3.0% year-on-year in November. This is the largest year-on-year increase since February 2023, with a 2.6% increase in October. The government released a report on Wednesday stating that the month on month increase in consumer prices in November was the largest in seven months, while indicators measuring potential price pressures have continued to rise over the past four months.

Wholesale commodity prices rose by 0.7% in November, accounting for nearly 60% of the month on month increase in PPI, compared to a 0.1% increase in October. Food prices surged by 3.1%, accounting for 80% of the increase in commodity prices. After a 20.6% decrease in October, wholesale egg prices surged 54.6% in November, the largest increase since June.

Energy prices increased by 0.2%. Excluding the volatile food and energy sectors, commodity prices rose by 0.2% in November, unchanged for five consecutive months.

After a 0.3% increase in October, service prices rose by 0.2% in November. The investment portfolio management fee fell by 0.6% after a sharp increase of 3.1% in October. After a 2.6% increase in October, air passenger ticket prices decreased by 2.1%. After a 2.8% increase in October, room prices in hotels and motels decreased by 3.1% in November. Doctor and hospital outpatient fees remain unchanged, but hospital inpatient fees have increased by 0.2%.

Portfolio management fees, healthcare, hotel and motel accommodations, and airfare prices are components of the core PCE price index that does not include food and energy. After the release of PPI data, economists will lower their forecast for the core PCE inflation rate for November from 0.3% after Wednesday's CPI report to 0.11%.

The core PCE inflation rate is one of the indicators that the Federal Reserve focuses on when formulating monetary policy. In October, the core PCE price index rose by 0.3% month on month for the second consecutive month. It is expected that the core PCE price index will increase by 2.8% year-on-year in November, which is the same as the growth rate in October.

According to the CME FedWatch Tool, financial markets have almost completely digested the expectation of a 25 basis point rate cut by the Federal Reserve at its policy meeting on December 17-18.

Another report from the Department of Labor shows that the number of first-time applicants for state unemployment benefits increased by 17000 in the week ending December 7th, to 242000 after seasonal adjustment.

This surge may reflect fluctuations after the Thanksgiving holiday and may not indicate a sudden change in labor market conditions. The number of recipients may continue to fluctuate in the coming weeks. However, regardless, the labor market is slowing down.

The unemployment benefit report also shows that in the week ending November 30th, the number of people receiving unemployment benefits, which measures recruitment, increased by 15000, to 1.886 million after seasonal adjustment.

The increase in the number of people receiving unemployment benefits indicates that some laid-off workers are experiencing longer periods of unemployment. The median duration of unemployment in November rose to the highest level in nearly three years.

Latest inflation data drives US dollar to near two-week high

The US dollar rose 0.34% on Thursday, closing at 107.00. It had touched 107.04 during trading, a new high in nearly two weeks, after a higher than expected inflation reading led to a slight decline in the euro following the European Central Bank's decision to cut interest rates for the fourth time this year.

Karl Schamotta, Chief Market Strategist at Corpay, stated in a report, "Although the Federal Reserve is expected to lower its benchmark interest rate by 25 basis points, the actions of the Bank of Canada, the Swiss National Bank, and the European Central Bank over the past 24 hours have ensured that the cross currency spread relative to the United States will remain large, thereby maintaining the relative advantage of the US dollar

US Treasury yields rise to over two-week high, data points to Fed cutting hawkish interest rates

The yield of US treasury bond bonds rose on Thursday, but at one time narrowed the increase. The previous data showed that the number of people applying for unemployment benefits rose in the recent week, and the increase of producer prices was higher than economists' expectations, but it showed some potential weakness.

These data overall confirm the expectation that the Federal Reserve will cut interest rates by another 25 basis points at the end of its two-day meeting next Wednesday.

But it is expected that the Federal Reserve will also adopt a hawkish tone and may signal a pause in interest rate cuts in January to assess the inflation outlook (inflation still above the annual target of 2%) and the strength of the labor market.

Gennadiy Goldberg, the head of US interest rate strategy at TD Securities in New York, said, "Given that the economy may perform reasonably well, I believe the Federal Reserve may decide to hold its ground and simply wait and evaluate to ensure that inflation expectations do not re accelerate.

Goldberg said, "The last thing they want is to have to restart the interest rate hike cycle next year because they missed something

The key to the Fed's interest rate hike path next year lies in the speed at which the Trump administration introduces policies, including new tariffs that analysts believe may increase inflation.

Goldberg said that TD Securities has lowered its estimate for the Personal Consumption Expenditures Price Index based on data, which is the Federal Reserve's most favored inflation indicator. "Many categories included in PCE have actually weakened a lot," he said

The yield of 10-year treasury bond rose 5.5 basis points to 4.326% on Thursday, reaching a peak of 4.332%, the highest since November 25.

The European Central Bank has cut interest rates again and opened the door for further cuts, emphasizing the high risks to the outlook

The European Central Bank cut interest rates for the fourth time this year on Thursday and opened the door to more easing policies as the eurozone economy was dragged down by political instability within the region and the threat of a new round of trade wars in the United States.

For several months, the European Central Bank has been rapidly easing policies as inflation concerns have largely disappeared. The current debate has shifted to whether the European Central Bank's rate cuts are sufficient to support an economy that lags behind other global economies and has been hovering on the brink of recession for over a year.

Christine Lagarde, the President of the European Central Bank, described this increasingly bleak outlook as "uncertainty... abundant", causing concern among a few decision-makers who even pushed for a half percentage point cut in interest rates to buffer the eurozone economy.

But Lagarde said they unanimously agreed to cut interest rates by 25 basis points and lower the European Central Bank's deposit rate to 3%.

The central bank has also abandoned its previous guidance on maintaining sufficiently restrictive interest rates, which economists believe indicates that further policy easing is imminent - perhaps as early as January, as inflation is expected to reach the European Central Bank's 2% target by early 2025.

The process of slowing inflation is progressing smoothly, "Lagarde said at a press conference." The factor that has changed... is the downside risk, especially the downside risk to economic growth, which is even more complex

However, she hardly revealed the future situation, even though the European Central Bank removed restrictive language. Some economists say that this signal could have been stronger.

The key wording was removed, but not replaced with many things, "HSBC said in a report.

Lagarde also warned that the inflation rate in the region remains uncomfortably high, and efforts to overcome excessive price growth have not yet been completed.

There will be more interest rate cuts in the future, but the European Central Bank seems to be still on the path of normalization and does not seem to be in a hurry to take this path, "Nordea said in a report." Lagarde emphasized that the European Central Bank has already completed four interest rate cuts, indicating that the space for further interest rate cuts may be limited

However, these words did not ease the expectations of the financial market, which expects interest rate cuts at every meeting from now until June next year.

Even though Lagarde was vague about further interest rate cuts, she spared no effort in emphasizing the downside risks facing economic growth, including the potential trade tensions with the United States during the presidency of new US President Trump.

These concerns have at least to some extent affected the economic forecast of the European Central Bank, which predicts that economic growth will be slower than previously expected, and economic recovery will be limited and delayed.

Decision makers who support a 50 basis point reduction in interest rates believe that if punitive tariffs are imposed as threatened by Trump, economic growth next year may fall below 1%.

As Germany faces early elections and France is also striving to find a stable government, downside risks have prevailed.

Swiss central bank cuts interest rate by 50 basis points, marking the largest decline in nearly a decade

The Swiss National Bank lowered interest rates by 50 basis points on Thursday, marking its largest rate cut in nearly a decade. The bank is attempting to stay ahead of other central banks' expected rate cuts and curb the appreciation of the Swiss franc.

The Swiss National Bank has lowered its policy interest rate from 1.0% to 0.5%, the lowest level since November 2022.

Although the market has anticipated a rate cut, a Reuters survey shows that over 85% of economists expect a rate cut of 25 basis points.

This is the largest reduction in borrowing costs since the Swiss National Bank's emergency interest rate cut in January 2015.

The underlying inflation pressure has once again decreased this quarter. The relaxation of monetary policy today takes into account this development, "said the Swiss National Bank." The central bank will continue to closely monitor the situation and adjust monetary policy as necessary to ensure that inflation rates remain within a range consistent with medium-term price stability

This is the first policy adjustment made by the Swiss National Bank under the leadership of its new governor Martin Schlegel, and the pace of this monetary policy adjustment has accelerated compared to the previous president Thomas Jordan's three 25 basis point interest rate cuts this year.

This is because inflation in Switzerland is weak, with an inflation rate of 0.7% in November, and the inflation rate has been within the central bank's target range of 0-2% since May 2023.