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Gold: Sharp up on fund flows as China’s manufacturing PMI disappints
Performance
Notwithstanding sharply higher US Dollar, spot gold rallied more than 1 per cent on January 2 as fresh fund flows at the beginning of the year lifted the prices. The metal also gained on disappointing PMIs out of China and the Euro-zone.
Spot gold traded in the range of $2,621-$2,661 on January 2.
The yellow metal was changing hands at $2,656, up nearly 1.2 per cent on the day, at the time of the MCX closing. The MCX February contract at Rs 77,719 (LTP) was up 1.07 per cent on the day.
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Gold rallied 27 per cent in 2024, its best annual performance since 2010.
Data roundup
China's Caixin manufacturing PMI (December) disappointed as the Index at 50.50 trailed the estimate of 51.70, which is the slowest pace of expansion since October. China's stimulus does not seem to be working in the expected manner at least for the manufacturing sector.
It is to be noted that even NBS manufacturing PMI data came in at 50.1 as against the forecast of 50.20, the slowest pace since October, though NBS services PMI at 52.20 surpassed the expectations of 50.20.
The US data, released on Thursday, were largely positive as initial jobless claims fell to 211K (forecast 221K) from 219K, continuing claims fell from 1896K to 1844K (forecast 1890K), S&P global US manufacturing improved to 49.4 (forecast 48.30) in the December final reading from 48.30, though construction spending remained unchanged in November; thus, trailing the forecast of +0.3 per cent.
The UK's manufacturing PMI (December final) at 47 fell short of the estimate of 47.30. The Euro-zone's manufacturing PMI (December final) came in at 45.1 Vs the estimate of 45.20.
Upcoming data
Today's US ISM manufacturing will be the key data on traders' radar. Apart from this data, traders will monitor Germany's employment data (December) also.
ETF
Total known global gold ETF holdings stood at 82.843 MOz as on January 1. It is to be noted that gold ETF holdings fell for the fourth straight year in 2024 as the annual holdings in 2024 at 82.834 MOz were the lowest on annual closing basis.
China’s gold imports from Hong Kong
China’s net gold imports via Hong Kong in November more than doubled to 33.07 tons in November from 15.41 tons in October.
Outlook
Concerns about Chinese economy and fund flows are supportive for the counter. Chinese Yuan fell to a two-year low. Gold holding on to its own despite Dollar surging to a fresh 52-week high is a positive signal for the metal. However, thin liquidity condition continues, which poses a risk of exaggerated moves.
As it would take further weakness in the key US data to send the 10-year US yields below 4.5 per cent, the upside in gold may be limited, though the metal is expected to trade with a positive bias in ultra-short term.
Buying the dips is advisable for a test of resistance around $2,700 unless the US yields surge sharply to a fresh cycle high.
Gold support is at $2633 (Rs 77,000)/ $2,600 (Rs 76,000)/$2,581 (Rs 75,500), whereas resistance lies at $2,664 (Rs 78,000)/$2,700 (Rs 79,000). (Disclaimer: Praveen Singh is an associate VP of fundamental currencies and commodities, Mirae Asset Sharekhan. Views expressed are his own.)
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