Tuesday Market Recap
The US Producer Price Index (PPI) data released on Tuesday came in below expectations, sparking hopes that the Federal Reserve might continue its rate-cutting path in 2025. This led to a decline in the US dollar and a modest rebound in gold, which rose by 0.5% to close at $2,677 per ounce. However, oil prices retreated as ceasefire talks in Gaza progressed and investors took profits, with WTI and Brent crude both dropping over 1%.
Gold Market Overview
Gold prices edged higher on Tuesday, benefiting from weaker-than-expected US PPI data and a softer US dollar. By the end of the session, gold rose by 0.5% to settle at $2,677 per ounce.
Market Drivers
- US PPI Data:
- December PPI rose 3.3% year-over-year, the highest since February 2023. Although higher than November’s 3%, it fell short of the 3.4% market expectation.
- On a monthly basis, PPI increased by 0.2%, below the expected 0.4%.
- Impact on Markets:
- Following the PPI release, the US dollar index fell by 0.37% to 109.18, making gold more appealing to overseas buyers.
- However, the 10-year Treasury yield climbed to a 14-month high of 4.82%, increasing the opportunity cost of holding gold and tempering gains.
- Trump Policy Uncertainty:
- President-elect Donald Trump announced plans to establish a new “External Revenue Service” focused on tariffs and taxes on imports. This heightened market uncertainty and provided additional support for gold.
Looking Ahead
Investors are closely watching Wednesday’s Consumer Price Index (CPI) data for more clues on the Federal Reserve’s rate-cutting trajectory. Forecasts suggest a 0.3% month-over-month increase and a 2.9% year-over-year rise, compared to November’s 2.7%.
Technical Analysis of Gold
Gold experienced a rebound following Monday’s sharp decline, with prices finding support at $2,664 before climbing back. During the US session, prices surged past $2,678 before consolidating. The daily chart shows a recovery candle, suggesting the potential for further upside if $2,660 support holds.
Today’s Strategy
- Primary Focus: Buy on dips, sell on rallies.
- Key Levels:
- Resistance: $2,683–$2,688
- Support: $2,660–$2,655
Crude Oil Market Overview
Crude oil prices fell on Tuesday as progress in Gaza ceasefire talks and profit-taking paused recent gains. WTI crude settled at $77.50 per barrel (-1.67%), while Brent crude closed at $79.92 per barrel (-1.34%).
Market Drivers
- Gaza Ceasefire Talks:
- Sources reported significant progress in negotiations, with an agreement expected soon barring any last-minute hurdles. Talks continued in Qatar to finalize the details.
- EIA Short-Term Energy Outlook:
- The US Energy Information Administration (EIA) projected global oil production growth exceeding demand in 2025 and 2026, putting downward pressure on prices.
- Key Forecasts:
- 2025 Brent crude average: $74 per barrel (unchanged from prior estimates).
- 2026 Brent crude average: $66 per barrel, reflecting a further decline due to seasonal inventory builds.
Technical Analysis of Crude Oil
Oil prices faced resistance at $79, leading to a two-day pullback. After an initial bounce during the Asian session, WTI faced selling pressure at $77.50 and closed near session lows. Despite the correction, the daily chart signals a broader bullish trend, with technical indicators remaining positive.
Today’s Strategy
- Primary Focus: Buy on dips, sell on rallies.
- Key Levels:
- Resistance: $79.3–$79.8
- Support: $77.0–$76.5
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