- Markets anticipate significant US debt issuance activity this week.
- Current Fed interest rate projections suggest a January rate cut is unlikely, with attention shifting to the FOMC Minutes due later this week.
- Gold prices remain confined within a pennant pattern, maintaining both upward and downward boundaries.
Gold price (XAU/USD) climbs higher as markets focus on this week’s US debt issuance, including substantial 10-year and 30-year bond allocations. Concerns grow over whether the significant debt volumes might require higher premiums (elevated rates) to ensure successful allocations. Meanwhile, market sentiment remains tense amid ongoing discussions about President-elect Donald Trump’s proposed US tariff plans.
Earlier relief on Monday, following a Washington Post report suggesting Trump was considering a universal tariff on critical imports, was short-lived. After Trump dismissed those claims, Gold prices retraced to their opening levels for the week.
The Institute for Supply Management (ISM) released its Services Sector data, reinforcing market focus on interest rates. The report showed a sharp increase in the Prices Paid index, which surged to 64.4, well above expectations of 57.5 and the previous 58.2 reading for December. The stronger data boosted the US Dollar and Treasury yields, delaying expectations for the Federal Reserve’s first rate cut to July at the earliest.
Daily Digest Market Movers: Inflation Concerns Resurface
- Eurozone Inflation Rises: Inflation data from several European countries and the broader Eurozone signals a reversal in the disinflation trend. Monthly inflation metrics have ticked higher, challenging the European Central Bank’s (ECB) projected policy path. The ECB is expected to cut its policy rate by 25 basis points on January 30, but this latest data could complicate the outlook.
- US Yields Surge: The US 10-year Treasury yield climbs to 4.68%, an eight-month high, driven by inflation concerns following the ISM Services report.
- Fed Rate Expectations: The CME FedWatch Tool indicates only a 10% probability of a 25 basis point rate cut in January. The Federal Reserve is expected to remain data-dependent, with uncertainties looming as President-elect Donald Trump prepares to take office on January 20.
- Upcoming US Data: Key data releases include November JOLTS Job Openings at 15:00 GMT on Tuesday and the ISM Services PMI for December. Both reports will shape market sentiment ahead of Friday’s critical US Employment Report.
- Treasury Auctions: The US Treasury will conduct a 3-year bond auction at 18:00 GMT on Tuesday, followed by the significant 10-year bond auction on Wednesday at the same time.
Technical Analysis: Gold Holds Steady as Inflation Hedge Remains Intact
Gold prices remain in a holding pattern as traders appear content with current levels. Despite a weaker US Dollar and heightened geopolitical tensions, including tariff uncertainties, there has been no significant flight to the safe-haven asset. Should market conditions shift, a catch-up move in Gold could materialize.
The 100-day Simple Moving Average (SMA) at $2,628 continues to act as strong support following a brief false break on Monday. Below this, the ascending trendline of the pennant pattern offers additional support around $2,608, a level that has held firm in three previous instances. A break below this trendline could trigger a rapid decline toward $2,531, the high from August 20, 2024, which would act as a key support level.
The 55-day SMA at $2,656 is the initial resistance to overcome, having proven to be a tough barrier twice last week. A decisive move above this level would target $2,688, aligning with the descending trendline of the pennant formation and marking the ultimate upside barrier in the near term.
