The U.S. Comex gold futures (COMEX:GCG14) surged 1.91% to $1,262.30 on Thursday after dropping 1.06% earlier in the week. On the contrary, the Dollar Index (NYBOT:DXH14) plunged 0.90% to 80.438, the largest daily percentage decline since mid-October. The S&P 500 Index (CME:SPH14) and the Euro Stoxx 50 Index fell 0.54% and 1.17% respectively this week. The U.S. 10-year Treasury note (CME:ZNH14) yield plunged about nine basis points on Thursday to 2.779%, the lowest level since the beginning of December.
The Cross Currents of Economic Data
The recent economic data from the U.S. are weaker than in the Q4. The continuing jobless claims rose to 3.06 million as of Jan. 11 compared to an expected 2.925 million. The U.S. January preliminary PMI was 53.7, lower than the 55 expected. The leading index rose 0.1% in December compared to 0.8% in November. The China flash January PMI fell to 49.6 (that means a contraction) versus 50.5 in the prior month. The contraction adds to the concerns of rising interest rates and the possibility of defaults of China's high-yielding trust products. In the Eurozone, the January PMI rose to 53.9 compared to 52.7 last month, beating the expectation of 53.
Forecasters' Tamed Outlook
The LBMA and the GFMS expect an average gold price of $1,219 and $1,225 in 2014. This compares with an actual average price of $1,411 last year and a gold price of $1,204.50 for London Gold Market PM Fixing as of Dec. 30, 2013. Adding to the more cautious price forecasts, the jewelry demand in the first half of 2014 is expected to drop 16% according to GFMS. Jewelry demand reached 2,198 tonnes last year, a five-year high. However, if India does relax the draconian import curb on gold, as recommended by Congress party leader Sonia Gandhi, the pent-up demand for gold would help gold prices this year.
What to Watch
We will watch the ECB President speech in Davos on Jan. 24. Next week, we will monitor the January Germany IFO business climate index on Jan. 27, the December U.S. durable goods orders, and the January U.S. consumer confidence index on Jan. 28, the U.S. FOMC interest rate decision on Jan. 29, the preliminary U.S. Q4 GDP, Japan's December CPI and industrial production on Jan. 30 as well as the Eurozone December unemployment rate and the December U.S. core PCE price index on Jan. 31.