Gold’s Best Week Since November as Dollar Gains Amid Fed and Trump Policy (13 - 17 Jan)

The US Dollar Index ended the week higher, bolstered by hawkish FOMC minutes and inflation data. Despite positive PMI data and inflation figures supporting a less aggressive ECB stance, the euro weakened against the stronger dollar. The pound also fell, pressured by rising yields and capital outflows linked to inflation and fiscal instability.

Gold had its best week since mid-November, despite hawkish Fed comments. Silver posted its second consecutive weekly gain, supported by positive developments in China.

U.S. 10-year yields hit a 9-month high of 4.72%, driven by inflation concerns, while 2-year yields remained steady. Chinese 10-year yields recovered slightly to 1.67% after the PBOC paused bond purchases.

German CPI

Germany's inflation rose for the third month to 2.6% in December, up from 2.2% in November, exceeding forecasts of 2.4%. This marks an 11-month high, driven by faster price increases in services (4.1%) and food (2%), while energy prices declined at a slower pace (-1.7%). Monthly CPI rose 0.4%, beating expectations of 0.3%. EU-harmonized CPI increased by 2.8% annually and 0.7% monthly, both above forecasts.

U.S. Service PMI

The S&P Global US Services PMI for December was revised to 56.8 from 58.5, still above November’s 56.1, showing the fastest sector growth since March 2022. Improved client demand and accelerating new business drove growth, while inflation eased for the third month. Business confidence surged to an 18-month high, with optimism about the incoming administration.

Eurozone CPI

Euro Area inflation rose to 2.4% in December, the highest since July, driven by energy price increases (0.1%) and rising service inflation (4%). Germany and Spain saw inflation rise to 2.8%, while Italy's slowed to 1.4%. Core inflation held steady at 2.7%, with the ECB expecting inflation to reach its 2% target by year-end.

U.S. Services PMI

ISM Services PMI rose to 54.1 in December, up from 52.1, exceeding expectations of 53.3, marking consistent sector expansion.

U.S. Services Prices

The ISM Services PMI Prices Index climbed to 64.4% in December, the highest since January 2024, signaling persistent inflation as prices rose for the 91st consecutive month.

U.S. JOLTS Job Openings

Job openings increased by 259,000 to 8.1 million in November, surpassing forecasts. Gains were seen in professional services, finance, and education, while information jobs declined. Quits fell by 218,000 to 3.1 million, with layoffs steady at 1.8 million.

U.S. ADP Employment Change

Private businesses added 122,000 jobs in December, the smallest increase in four months. The service sector led gains, particularly in healthcare, while manufacturing lost 11,000 jobs. Wage growth for job-stayers slowed to 4.6%, the lowest since July 2021.

Initial Jobless Claims

Initial claims fell by 10,000 to 201,000 for the week ending January 4, the lowest in 11 months. The 4-week moving average decreased to 213,000 while continuing claims rose slightly to 1.867 million.

U.S. Nonfarm Payroll

The US added 256,000 jobs in December, beating forecasts of 160,000. Gains were led by healthcare, government, and social assistance. Annual payroll growth slowed to 2.2 million jobs, below the 3 million increase in 2023.

U.S. Average Hourly Earnings

Average hourly earnings rose 0.3% to $35.69 in December, with annual growth at 3.9%, slightly below forecasts. Non-supervisory worker earnings remained flat at $30.62.

U.S. Unemployment Rate: The unemployment rate dropped to 4.1% in December from 4.2%, with 235,000 fewer unemployed individuals and 478,000 more employed.

Currencies

The Dollar Index rose after Fed minutes hinted at slower policy easing amid inflation concerns and Trump administration uncertainties. The euro weakened despite strong PMI data, while the pound fell due to UK inflation and fiscal instability. The yuan was stable after the PBOC paused bond purchases, citing market conditions. The Canadian dollar strengthened slightly but remains near 2016 lows amid trade concerns tied to Trump’s tariff plans and Trudeau’s resignation.

Commodities

Gold had its best week since mid-November, despite hawkish comments from Fed members and the FOMC meeting minutes. Meanwhile, silver closed the second consecutive week in the green, driven by positive news from China.

Equities

On the indices front, US indices ended the week lower. The S&P 500 declined by about 0.50%, while the Dow Jones lost around 0.2%. The worst performer, the Nasdaq, ended the week down by approximately 0.8%.

On the stocks front, Apple led the declines with a weekly drop of nearly 3.8%, while Tesla followed closely with a decrease of around 7%.

The most notable stocks that gained value last week were Meta, Nvidia, and Google. Meta rose by around 3%, while both Nvidia and Google increased by approximately 1.5%.