Gold hits 6-month high

Gold soars above $2,000, riding Dollar weakness amidst investor speculation on U.S. interest rates

By Ahmed Azzam | @3zzamous | 27 November 2023

  • Gold tops $2,000

  • Japan's PPI rises

  • Chinese profit concerns

In the face of tepid market sentiment, Asian equity markets witnessed a downturn on Monday, with investors eagerly anticipating a cascade of economic indicators scheduled for release throughout the week. China is poised to unveil critical manufacturing activity data, while Australia is set to provide insights into October's inflation figures. Shares across Australia, Japan, Hong Kong, and mainland China all experienced declines, amplifying concerns about the regional economic landscape.

Gold surges to six-month high

On Monday, the price of gold surged beyond $2,000 per ounce, reaching its highest level in over six months. This significant upswing in gold prices can be attributed to the weakened dollar, as traders increasingly bet on the notion that U.S. interest rates have already reached their peak. Last week's economic data from the U.S. portrayed a mixed scenario. While certain indicators remained robust, such as manufacturing activity, weak consumer spending figures hinted at the potential impact of the Federal Reserve's recent rate hikes on the broader economy.

Investors are now turning their attention to key indicators scheduled for release this week, such as the latest Personal Consumption Expenditures (PCE) prices, the ISM Manufacturing Purchasing Managers' Index (PMI), and personal income and spending figures. These data points are expected to provide further guidance on the trajectory of the U.S. economy and the potential future actions of the Federal Reserve.

Japan's PPI accelerates

In Japan, the October services Producer Price Index (PPI) accelerated to 2.3%, up from a revised 2% in September. This uptick in the PPI is reinforcing expectations that the Bank of Japan could embark on the path of normalizing monetary policy in the coming year. The positive momentum in the PPI suggests a potential strengthening of economic conditions in Japan, prompting investors to closely monitor the central bank's policy decisions.

Concerns loom over Chinese industrial profit growth

Meanwhile, concerns persist over the subdued growth in Chinese industrial companies, which is likely to make businesses more cautious about expansion and hiring. The pressure on prices is expected to intensify as profits in October increased by a mere 2.7% year-on-year, a stark contrast to September's robust 11.9% gain. This downward trajectory in profits underscores the challenges faced by Chinese firms, raising questions about the sustainability of economic growth in the region.