On Monday (January 6th), in the morning session of the Asian market, spot gold fluctuated narrowly and is currently trading around $2640.18/ounce, which is close to the middle of the Bollinger Bands. Gold prices fell from a three week high last Friday, closing at $2639.62 per ounce, a decrease of about 0.69%. The US January ISM manufacturing PMI data was stronger than market expectations, and US bond yields strengthened, putting pressure on gold prices. At the same time, the market is preparing for possible economic and trade changes that may occur after US President elect Trump takes office.

Nitesh Shah, commodity strategist at WisdomTree, stated that the new president's support for raising tariffs has boosted the US dollar and brought significant potential pressure to the metal market.

The US dollar index rose 0.82% last week, marking its strongest weekly performance since mid November and the fifth consecutive week of gains, making gold more expensive for overseas buyers. Despite a slight decline of 0.3% last Friday, it closed around 108.91. Last Thursday, the US dollar index hit 109.54, a new high since November 10, 2022.

Trump will be sworn in on January 20th. The tariffs and protectionist policies he proposed are expected to exacerbate inflation.

This may slow down the pace of interest rate cuts by the Federal Reserve and limit the upward potential of gold. After cutting interest rates three times in 2024, the Federal Reserve is expected to only cut rates twice in 2025 due to persistent inflation.

The manufacturing industry in the United States is close to recovery in December, with production rebounding and new orders further increasing, but the outlook remains uncertain due to possible tariff increases or higher import raw material prices.

Although the Purchasing Managers' Index (PMI) of the Institute for Supply Management (ISM) in the United States rose to a nine month high last month, the tone of the survey was not so optimistic, with phrases such as "quantity decline" and "significant slowdown" appearing in some respondents' comments. The six largest manufacturing industries did not show growth last month.

Sal Guatieri, Senior Economist at BMO Capital Markets, said, "The manufacturing industry showed a bit of optimism at the end of the year, but they may face some quite severe challenges in the new year

The Institute for Supply Management (ISM) announced last Friday that the manufacturing PMI rose to 49.3 last month, the highest level since March and higher than November's 48.4. A PMI below 50 indicates a contraction in the manufacturing industry, which accounts for 10.3% of the economy.

December is the ninth consecutive month that PMI has fallen below the threshold of 50. Economists previously predicted that the PMI would remain unchanged at 48.4.

The Federal Reserve actively tightened monetary policy in 2022 and 2023 to curb inflation, causing a heavy blow to the manufacturing industry. But confidence surveys, including PMI, exaggerated the extent of factory production decline.

Last month's government data showed that the annualized growth rate of the manufacturing industry in the third quarter was 3.2%, contributing to the 3.1% economic growth rate during the same period.

President elect Trump has promised tax cuts, which could boost the manufacturing industry. But other policy commitments, including increasing tariffs on imported goods, may push up material prices.

The ISM survey's forward-looking new orders sub index rose from 50.4 in November to 52.5. This sub index showed expansion for the first time since March in November. Factory production has rebounded after several months of contraction. The manufacturing payment price index rose from 50.3 in November to 52.5.

LPL Financial Chief Economist Jeffrey Roach said, "Given the uncertainty of the future trade environment, companies may pull demand ahead of schedule." Roach added that the rise in the input price index is a "sign of sustained inflationary pressure.

Trump has vowed to impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on products from major Asian countries. The Institute for Supply Management (ISM) import index rose from 47.6 last month to 49.7, which clearly reflects concerns about tariff increases.

Timothy Fiore, Chairman of the ISM Manufacturing Business Survey Committee, attributed the increase in import and inventory indices to "early delivery of materials to avoid potential tariffs" and actions taken by businesses to "better mitigate any potential tariff impacts in the future".

Factory employment further shrank, with the manufacturing employment index dropping from 48.1 in November to 45.3. This indicator is not a reliable predictor of manufacturing employment in the highly anticipated government employment report.

Two Federal Reserve decision-makers stated last Saturday that they believe the Fed's efforts to control inflation are not yet complete, but they also do not want to risk damaging the labor market in the process.

The speeches by Federal Reserve Governor Adriana Kugler and San Francisco Fed President Mary Daly highlighted the delicate balance the Fed is facing this year after adjusting short-term interest rates by a full percentage point last year.

At the annual meeting of the American Economic Association held in San Francisco, Kugler said, "We are fully aware that we have not yet achieved our goal - no one is celebrating with champagne anywhere. At the same time... we want the unemployment rate to remain at its current level," rather than rapidly rising. The unemployment rate in November was 4.2%.

Daley said in a speech at the same group meeting, "Currently, I don't want to see the labor market slow down further - maybe there will be fluctuations in the labor market in a specific month, but it definitely won't slow down further

Richmond Fed President Barkin said last Friday that the Fed's benchmark policy rate should remain restrictive until it is more certain that inflation is returning to its 2% target.

Barkin said at the Maryland Bankers Association event, 'I believe the upward risk of inflation outweighs the downward risk,' as the economy remains strong and wage and other price pressures may resurface. I believe my position is to maintain restrictions for a longer period of time, rather than the other camp, which is' We've already done it, why not lower interest rates to neutral levels'

Although Barkin is not a voting member of the Federal Reserve's interest rate setting committee this year, his remarks reflect the ongoing debate within the Fed over when to cut interest rates again and how to respond to the increasingly uncertain economic environment as US President elect Trump prepares to return to power later this month.

Despite the recent rise of the US dollar, there is still great uncertainty about when the new US government will introduce policies and their ultimate impact. This may temporarily halt the rise of the US dollar in the short term. And this uncertainty will also increase the safe haven demand for gold.

Monex USA currency trader Helen Given said, "With the government coming into power, we may see a pullback in the US dollar because all these proposed tariffs - which will take some time to implement, and we don't actually know if all of these proposals will be implemented. As the second half of this year approaches, I believe the US dollar will further strengthen.

The yield of US treasury bond bonds held steady near the recent high on Friday, rising after the encouraging manufacturing news was released, but the trend was limited in the holiday depression trading before this week's key employment data and a large number of bills and bonds issuance.

The market is paying more attention to a series of labor market data to be released this week, with Friday's December employment report receiving the most attention.

Lou Brien, a market strategist at DRW Trading, said, "In such a calm market without any significant factors in the near future, the market will only turn to liquidity, which may arise for any reason, whether it is arbitrage or portfolio liquidation

Given the low unemployment rate and persistent inflation, it is expected that the Federal Reserve will not relax policy again this month. Federal funds rate futures traders believe that the probability of the Fed remaining inactive is close to 90%, and the probability of the first 25 basis point rate cut of the year in March is 50%.

Republican Mike Johnson narrowly won the vote on Friday, securing his position as Speaker of the United States House of Representatives.

This vote highlights the divisions within the Republican Party, and the Speaker will face a daunting task of dealing with Trump's bold legislative agenda. Congress must address the national debt ceiling issue later this year, with the federal government's debt exceeding $36 trillion, and many congressional Republicans are expected to demand significant spending cuts.

This week, the Ministry of Finance will auction off $119 billion worth of face securities to help fund excess spending, which will once again remind people of the budget challenges faced by the government. Auction $58 billion of three-year bonds on Tuesday, $39 billion of 10-year bonds on Wednesday, and $22 billion of 30-year bonds on Thursday.

The 10-year bond is still worth paying attention to, "Brien said." What I mean is that our interest rates are higher than when we started this loose cycle, which usually indicates some concerns about the Fed's stance on inflation. But we have stabilized

The yield of US 10-year treasury bond bonds rose 1.4 basis points to 4.589% last Friday from the end of Thursday. The two-year bond yield, which usually fluctuates in sync with the Federal Reserve's interest rate expectations, rose 2 basis points to 4.268% last Friday.

It should be noted that gold is currently benefiting from seasonal demand support, and there is still an opportunity for bulls to continue oscillating upwards. The data shows that the probability of gold price rising in January in previous years is relatively high. In the past decade, seven of the January gold prices have recorded an increase, and the average spot gold price has risen by $38.82 in January, which is the largest increase among all months.

In addition, the geopolitical situation is still providing support for gold prices.

On January 5th local time, the Israeli military issued a statement stating that it had killed a military commander of the Palestinian Islamic Jihad organization (Jihad) in its recent military operation in Jabaliya, northern Gaza Strip.

Yemeni Houthi spokesman Yahya Sareya issued a statement on January 5th, stating that the Houthi missile force used the "Palestinian 2" hypersonic ballistic missile to strike Orot, located south of the northern Israeli city of Haifa? Rabin Power Plant, the operation successfully achieved its goal.

On January 5th, the Russian Ministry of Defense reported that in the past day, the Russian military has repelled multiple Ukrainian attacks and launched offensives in multiple directions, including Kharkiv, Afjievka, Donetsk, Zaporizhzhia, and Kherson. On the same day, the General Staff of the Ukrainian Armed Forces reported that as of the afternoon of that day, there had been 106 battles in the front-line areas, concentrated in the directions of Pokrovsk, Kurahovo, and Kursk.

On this trading day, we also need to pay attention to the monthly rate of US factory orders in November, the speech to be delivered by Federal Reserve Governor Lisa Cook, and the market's expectations for the Federal Reserve meeting minutes and the US December non farm payroll report.