Gold has posted gains on Tuesday, continuing the upward movement which started the week. The metal is trading at a spot price of $1213.20 per ounce in the European session. In the US, today’s highlight is the ISM Non-Manufacturing PMI, with the markets expecting a weaker reading for December. The estimate stands at 58.2 points.
Deflation worries in the Eurozone continue, as German Preliminary CPI remained stuck at the 0.0% level in December for a second straight month. This missed the very modest estimate of 0.1%. The reading comes at a crucial time, with the ECB holding a policy meeting on January 22. With the threat of deflation hanging over the Eurozone like a dark cloud, the ECB will have to seriously consider quantitative easing, which would mean buying large amounts of Eurozone bonds. QE worked well in the US, but the Federal Reserve was calling the shots and was able to implement and then taper QE as it pleased. It’s a far different story in Europe, as the powerful German Bundesbank has voiced its opposition to such a move and ECB head Mario Draghi will find it difficult to take such a dramatic step without a strong consensus.
On Friday, US ISM Manufacturing PMI disappointed, falling to 55.5 points. This missed the forecast of 57.6 points and marked a 6-month low for the index. Still, market sentiment remains positive regarding the US economy, and the US dollar continues to look sharp against its major rivals. We’ll get a look at the ISM Non-manufacturing PMI on Tuesday. The markets are expecting a softer reading in the December release.
