Next week, commodities markets will be focusing on US retail sales and CPI data; metals may continue to be weak owing to Chinese holidays

Next week, commodities markets will be focusing on US retail sales and CPI data; metals may continue to be weak owing to Chinese holidays

Ahead of the Chinese Lunar New Year holidays, LME base metals experienced difficulties due to regional inventory increases and ongoing deflationary pressures in China.

A week of fluctuating financial markets was brought on by shifting expectations on the activities of the Federal Reserve, economic data from China, and escalating geopolitical tensions in the Middle East. The dynamics were impacted by remarks made by FOMC members and positive US economic statistics, which caused expectations of a rate drop by the Federal Reserve to be reevaluated.

The Fed's base-case forecast, which calls for a 75 basis-point reduction in government funding in 2024, has not changed, according to government Reserve Chairman Jerome Powell, citing recent events as evidence. Similar remarks were made by a number of FOMC members, who emphasized that there was no pressing need to cut interest rates. In spite of this, US markets achieved fresh highs, as the Nasdaq reached a one-year high and the S&P 500 crossed the 5000 threshold for the first time. Strong earnings reports and statistics demonstrating the strength of the US economy were the main drivers of the jump, which was credited to restored investor confidence.

COMEX gold prices had a negative skew at the beginning of the week after good US employment data and Powell's pointed remarks that a rate decrease in March is improbable. The downgrading of NYCB to junk status by Moody's owing to large losses on its commercial real estate (CRE) loans raised concerns about the viability of US regional banks, namely their exposure to CRE loans. While acknowledging worries over CRE losses, Treasury Secretary Janet Yellen gave assurances that authorities are striving to guarantee sufficient loan-loss buffers and liquidity levels in the banking sector.

The persistent withdrawal of ETFs caused investment activity to stay low. Nonetheless, investors welcomed the US debt auctions, so gold was spared a catastrophic fall. COMEX Silver has produced a bullish engulfing candlestick pattern on the price action front, suggesting good momentum in the next week. Only a decline below the pattern low of $22.19 per troy ounce will result in the pattern's rejection.

Due to Israel's rejection of ceasefire negotiations, geopolitical tensions grew, which had an impact on world markets. Following the Houthi assaults on two ships in the southern Red Sea and the US's pledge to launch further strikes against Iranian military and proxies in the area, WTI oil prices in the commodities market recovered previous losses to reach $77 per barrel. Beyond expectations. Crude oil prices increased as the Middle East scenario shattered prospects of an Israeli-Hamas peace.

Ahead of the Chinese Lunar New Year holidays, LME base metals experienced difficulties due to regional inventory increases and ongoing deflationary pressures in China. As China attempts to boost domestic demand and consumer confidence, consumer prices dropped by 0.8%, the most since the global financial crisis, and the producer pricing index (PPI) remained trapped in deflation for 16 months. Reflects the struggle of. Even with initiatives like the People's Bank of China (PBOC) raising liquidity, investors continued to doubt Beijing's support policies.

Looking forward, retail sales and the US Consumer Price Index (CPI) will be the main topics of discussion this coming week. According to Bloomberg projections, the core CPI will fall to 3.7 percent in January from 3.9 percent in December, while the headline CPI will marginally soften to 2.9 percent in January from 3.4 percent in December.

In the next week, gold prices may be supported by the geopolitical risk premium and expectations of reduced inflation. In addition, it is anticipated that metals volatility would be minimal at this time due to Chinese markets being closed for the Lunar New Year holidays.