Gold extends rally as global growth remains uneven

 

Weekly insights from the WGC reveal strong gold performance 

Recently, World Gold Council [WGC] published Weekly [December 1 to 5 December, week] Markets Monitor. Its key review highlights said, 1: Gold extended its strength: the LBMA Gold Price PM rose 1.2% w/w to US$4,243/oz, stretching the y-t-d gain to an impressive 63%. 2: Support from declining FX opportunity costs (+0.7%) outweighed pressure from rising yields, (-0.3%) and slowing gold ETF inflows (-0.1%), lifting gold up last week.  

3: Global investors continued to be net buyers of gold ETFs – albeit at a slower pace – and their gold options’ bullish exposure also pulled back. 4: Gold needs to see a sustained move above resistance at US$4,245/oz to complete a triangle, continuation pattern for a resumption of its core uptrend.  

The last week review for the US suggests, service sector strength, manufacturing weakness, and mixed signals from jobs market. Manufacturing and services activity continued to diverge, with the ISM manufacturing PMI falling to 48.2 in November, marking its ninth consecutive month of contraction, while the services PMI exceeded expectations, rising to 52.6, its strongest reading in nine months.  

Mixed reports emerged from the labor market. Private payrolls fell by 32,000 in November, the biggest drop since March 2023, led by small businesses, while initial jobless claims hit a three-year low of 191,000 in the last week of November, indicating resilience in the broader labor market. PCE prices in September were largely unchanged, rising 0.3% m/m and 2.8% y/y, in line with expectations.

The University of Michigan's consumer sentiment index rose modestly in December to 53.3, exceeding expectations, while year-ahead inflation expectations hit their lowest since January.  

Last week in review for the Eurozone said, services lead, manufacturing falters, inflation ticks up! Eurozone manufacturing fell back into contraction in November with a PMI of 49.6, while the services sector strengthened, rising to 53.6, its fastest pace in 18 months.  

Eurozone inflation rose unexpectedly to 2.2% y/y in November from 2.1%, as rising services costs offset falling energy prices, reinforcing expectations the ECB will keep rates steady. Euro area Q3 GDP growth was revised to 0.3% q/q from 0.2%, supported by a rebound in fixed investment. WGC reviewed China services as a growth hits 5-month low; exports surge! A private survey showed the services sector PMI fell to a five-month low in November, weighed down by slower new business and rising costs, despite a rebound in export orders. Exports rose by 5.9% y/y in November, driven by a rebound in shipments following a tariff truce with the US.  

Japan services hold up as manufacturing struggles, consumer spending drops. Manufacturing PMI fell in November, a fifth month of contraction but a slight improvement m/m, while services PMI edged up. And consumer spending in Japan fell 3% y/y in October, the steepest decline since January 2024, driven by weaker spending on food, entertainment, and automobiles.  

Japan’s Q3 GDP contracted 2.3% y/y – revised figures showed weaker business spending and housing investment than the preliminary data, backing Takaichi’s fiscal stimulus.  

By reviewing India, WGC focused on RBI cuts rate & service sector accelerates! The RBI cut the repo rate by 25bps to 5.25% and boosted liquidity to support strong growth amid falling inflation. Meanwhile, the services sector accelerated in November, fueled by robust domestic demand, despite a slowdown in export growth.