On Friday (December 13th), spot Gold fluctuated narrowly in the Asian market, currently trading at 2,680.80 USD/ounce. Gold fell more than 1% on Thursday, as investors took profits after briefly hitting a five-week high of 2,726 and closed positions ahead of next week's Federal Reserve meeting. Following stronger-than-expected US PPI data, the Gold price briefly dropped to 2,675.08, closing at 2,680.55 USD/ounce.

MarketPulse by OANDA Analyst Zain Vawda stated: "The bulls maintain recent momentum, but a pullback may occur before the Federal Reserve meeting as investors lock in profits." "Post-meeting focus will shift to guidance on the January meeting and future policy direction, which is critical for determining the sustainability of further market increases."

Although the European Central Bank made its fourth interest rate cut this year and opened the door to more easing policies; the Swiss National Bank cut rates by 50 basis points, marking the largest cut by this central bank in nearly a decade. However, these were largely in line with market expectations and provided further upward momentum for Gold prices. Some investors took profits before next week's Federal Reserve decision at the peak of positive sentiment.

Despite an increase in the number of initial jobless claims in the USA, the producer price index rose more than expected in November due to soaring food costs. Inflation data released on Wednesday indicated that the increase in consumer prices for November was the largest in seven months. This slightly dampened the outlook for Fed interest rate cuts, with the USD Index and US Treasury yields continuing to rise, further accelerating profit-taking among Gold bulls.

CME’s FedWatch tool shows a 94% probability of a rate cut in December, down from the previous day's 98.6%.

In terms of geopolitical situation, US National Security Advisor Sullivan stated on Thursday that he believes an agreement on a ceasefire and the release of hostages regarding Gaza may soon be reached, as Israel has indicated readiness and there are signs of action from Hamas. This has eased market concerns regarding the geopolitical situation.

Economic data is relatively sparse today, with a focus on the changes in the US November import and export price index. Additionally, investors need to continue monitoring relevant news regarding the geopolitical situation and keep an eye on developments related to Trump.

From a technical perspective, Gold prices failed to break through the resistance near the high of 2721 on November 25, and after being blocked twice at this position, they retreated. Short-term downward risks have increased, with support levels to watch at the 55-day moving average of 2669.20 and the 21-day moving average of 2650. Attention should also be paid to the resistance at the 2700 integer level; if the price can rise above this level, it will weaken the short-term downward risks.

(Spot gold daily chart, source: E-Huitong)

The USA's producer prices in November recorded the largest month-on-month increase in five months, but inflation in the service industry has slowed down.

In November, USA's producer prices hit the largest month-on-month increase in five months, but the decline in service prices such as portfolio management fees and airfare has brought hope that, although progress has stalled, the trend of slowing inflation continues.

The Bird Flu epidemic has led to a sharp rise in egg prices, which is the main reason for producer inflation exceeding expectations in November. However, most details in the report released by the Labor Department on Thursday were Bullish, prompting economists to significantly lower their predictions for the increase in the Personal Consumption Expenditures (PCE) price index, which is a preferred inflation indicator by the Federal Reserve.

This report and other data indicate that as labor demand cools, the number of people claiming unemployment benefits at the end of November has increased compared to the beginning of the year, reinforcing investors' expectations that the Federal Reserve will cut rates for the third consecutive time next week.

However, if the government of President-elect Trump continues to push for increased tariffs and large-scale deportation of illegal immigrants, inflation may rise next year.

We see almost no evidence of rising price pressures in the producer price data,” said Samuel Tombs, Chief USA Economist at Pantheon Macroeconomics. "The foundation for core PCE inflation to decline further next year is in place, but if the new government pushes forward with plans to increase import tariffs and expel immigrants, they will squander their victories close to the finish line."

The USA Bureau of Labor Statistics reported that the final demand Producer Price Index (PPI) jumped 0.4% month-on-month, the largest increase since June, while economists surveyed by Reuters had previously expected a rise of 0.2%. The October increase was revised up to 0.3% from 0.2%.

The PPI for November grew by 3.0% year-on-year. This is the largest year-on-year increase since February 2023, with a 2.6% rise in October. The government reported on Wednesday that the month-on-month increase in consumer prices for November was the largest in seven months, while indicators measuring potential price pressures have been rising for the past four months.

Wholesale commodity prices rose by 0.7%, accounting for nearly 60% of the month-on-month PPI increase, while the increase in October was 0.1%. Food prices soared by 3.1%, constituting 80% of the rise in commodity prices. After wholesale egg prices fell by 20.6% in October, they surged by 54.6% in November, achieving the largest increase since June.

Energy prices increased by 0.2%. Excluding the volatile food and energy components, commodity prices rose by 0.2% in November, maintaining the increase for five consecutive months.

Service prices increased by 0.3% in October before rising by 0.2% in November. Investment management fees fell by 0.6% after a sharp rise of 3.1% in October. Airline passenger ticket prices decreased by 2.1% after increasing by 2.6% in October. Room prices in hotels and motels declined by 3.1% in November after a 2.8% increase in October. Outpatient fees for doctors and hospitals remained unchanged, but hospital inpatient fees rose by 0.2%.

Investment management fees, Medical Care, Lodging in hotels and motels, and ticket prices for flights are components of the core PCE price index that excludes food and energy. Following the PPI data release, economists adjusted their forecast for the core PCE inflation rate in November from 0.3% after Wednesday's CPI report to 0.11%.

The core PCE inflation rate is one of the indicators that the Federal Reserve focuses on when formulating monetary policy. In October, the core PCE price index rose 0.3% month-on-month for the second consecutive month. The core PCE price index for November is expected to increase year-on-year by 2.8%, consistent with the increase in October.

According to the CME FedWatch Tool, the financial markets have almost fully priced in expectations for a 25 basis point rate cut by the Federal Reserve during its policy meeting on December 17-18.

Another report from the Labor Department shows that, for the week ending December 7, the number of initial claims for state unemployment benefits increased by 0.017 million, adjusted for seasonality to 0.242 million.

This jump may reflect fluctuations following the Thanksgiving holiday and may not signify a sudden shift in labor market conditions. Claims may continue to fluctuate in the coming weeks. Nonetheless, the labor market is slowing down.

The unemployment claims report also indicated that for the week ending November 30, the number of people continuing to claim unemployment benefits, which measures hiring conditions, increased by 0.015 million, adjusted for seasonality to 1.886 million.

The increase in continuing claims suggests that some laid-off workers are experiencing longer periods of unemployment. The median duration of unemployment in November rose to its highest level in nearly three years.

The latest inflation data drove the dollar up to its highest level in nearly two weeks.

On Thursday, the dollar rose by 0.34%, closing at 107.00, with an intraday high of 107.04, its highest level in nearly two weeks, following an inflation reading that exceeded expectations, while the euro slightly fell after the European Central Bank made its fourth rate cut decision this year.

Corpay Chief Market Strategist Karl Schamotta stated in a report, "Despite the expectation that the Federal Reserve will lower the benchmark interest rate by 25 basis points, actions taken by the Bank of Canada, the Swiss National Bank, and the European Central Bank over the past 24 hours have ensured that cross-currency interest differentials relative to the USA will remain large, thereby maintaining the relative advantage of the dollar."

US bond yields have risen to a two-week high, indicating that the Federal Reserve will lower interest rates in a hawkish manner.

US Treasury yields increased on Thursday, but at one point narrowed their gains, after data showed that jobless claims rose in the past week, and producer prices increased more than economists expected, although showing some potential weakness.

Overall, this data confirms expectations that the Federal Reserve will lower rates by 25 basis points again when it concludes its two-day meeting next Wednesday.

However, the Federal Reserve is also expected to adopt a hawkish tone and may signal that it might pause rate cuts in January to assess inflation outlook (inflation remains above the 2% annual target) and the strength of the labor market.

Gennadiy Goldberg, head of US interest rate strategy at TD Securities in New York, said, "Given that the economy may perform reasonably well, I think the Federal Reserve may decide to hold steady, just waiting and assessing to ensure that inflation expectations do not re-accelerate."

Goldberg said, "The worst-case scenario for them is that they have to restart the rate hike cycle next year due to missing something."

The key to the Federal Reserve's interest rate path next year lies in the pace of policy enactment by the Trump administration, including new tariffs that analysts believe may increase inflation.

Goldberg said that TD Securities lowered its forecast for the Personal Consumption Expenditures Price Index, which is the inflation indicator favored by the Federal Reserve, stating, "Many categories included in PCE have actually weakened considerably."

The 10-year Treasury yield rose by 5.5 basis points to 4.326% on Thursday, reaching a high of 4.332%, the highest since November 25.

The European Central Bank (ECB) has cut interest rates again and opened the door for further cuts, emphasizing that the outlook is fraught with risks.

On Thursday, the ECB conducted its fourth interest rate cut this year and opened the possibility for more easing policies, as the Eurozone economy has been weighed down by political instability within the region and threats from a new round of trade wars from the USA.

For months, the ECB has been rapidly easing its policies as inflation concerns have largely dissipated. The current debate has shifted to whether the speed of the ECB's rate cuts is sufficient to support an economy that has lagged behind other global economies and has been hovering on the edge of recession for more than a year.

ECB President Christine Lagarde described this increasingly bleak outlook as "uncertainty... is abundant," with a few decision-makers expressing concern, even pushing for a half-percentage point cut to buffer the Eurozone economy.

However, Lagarde stated that they agreed unanimously to cut rates by 25 basis points, lowering the ECB's deposit rate to 3%.

The central bank also abandoned the previously mentioned guidance on maintaining sufficiently restrictive rates, with economists believing this indicates further policy easing is imminent—possibly as soon as January, as the inflation rate is expected to reach the ECB's target of 2% by early 2025.

"The process of inflation slowing is proceeding smoothly," Lagarde said at the press conference: "The changing factors... are the downside risks, particularly the downside risks to economic growth, which are more complex."

However, she hardly revealed future conditions, even though the European Central Bank removed restrictive language, some economists indicated that this signal could have been stronger.

"Key wording has been removed, but not much has been replaced in its place," HSBC said in a report.

Lagarde also warned that inflation rates in the region remain uncomfortably high, and efforts to combat excessive price increases are not yet complete.

"There will be more rate cuts in the future, but the European Central Bank seems to remain on the path of normalization and does not seem to be in a hurry to pursue this path," Nordea said in a report, "Lagarde emphasized that the European Central Bank has completed four rate cuts, indicating that there may be limited room for further cuts."

However, these comments did not ease financial market expectations, with the market anticipating rate cuts at every meeting from now until June next year.

Even though Lagarde was vague about further rate cuts, she spared no effort in emphasizing the downside risks to economic growth, including the potential trade tensions with the USA under the administration of the newly elected President Trump.

These concerns have at least partially influenced the European Central Bank's economic forecasts, predicting that economic growth will be slower than previously expected, with only modest and delayed recovery.

Decision-makers in favor of a 50 basis point rate cut believe that if punitive tariffs are imposed as threatened by Trump, economic growth next year may fall below 1%.

As Germany faces an early election, France is also striving to find a stable government, with downside risks prevailing.

The Swiss National Bank has cut interest rates by 50 basis points, marking the largest reduction in nearly a decade.

On Thursday, the Swiss National Bank lowered its interest rate by 50 basis points, which is the largest rate cut by this central bank in almost 10 years, as it aims to stay ahead of other central banks that are expected to make similar cuts and to curb the appreciation of the Swiss Franc.

The Swiss National Bank has reduced the policy rate from 1.0% to 0.5%, the lowest level since November 2022.

Although the market had anticipated a rate cut, a Reuters survey showed that over 85% of economists expected a decrease of 25 basis points.

This is the largest decrease in borrowing costs since the Swiss National Bank's emergency rate cut in January 2015.

"Core inflation pressures have again eased this quarter. Today's easing of monetary policy takes this development into account," said the Swiss National Bank. "The central bank will continue to closely monitor the situation and adjust monetary policy as necessary to ensure that inflation remains within the range consistent with medium-term price stability."

This is the first policy adjustment made by the Swiss National Bank under the leadership of new President Martin Schlegel, and compared to the three cuts of 25 basis points made by former President Thomas Jordan earlier this year, this monetary policy adjustment has accelerated.

This is due to the weak Swiss Franc inflation, with the inflation rate in November being 0.7%, and it has been within the central bank's target range of 0-2% since May 2023.

As of 08:00 Beijing time, spot Gold is reported at 2680.27 USD/ounce.