On January 6th, U.S. manufacturing data exceeded expectations, driving the dollar index to rise for the fifth consecutive week, reaching around 108.91, despite a slight drop of 0.3% last Friday. The strong dollar put pressure on the gold market, with gold prices retreating from a three-week high. However, the policy direction of the new government and global economic uncertainty may still provide safe-haven support for gold.
Last month, the Institute for Supply Management (ISM) reported that the U.S. Manufacturing PMI rose to 49.3, the highest in nine months, surpassing economists' expectations of 48.4. Although the PMI remains below the contraction threshold of 50, the rebound in new orders and production data indicates a recovery in manufacturing activity. This data injected brief optimism into the market, but rising import raw material prices and possible tariff adjustments continue to complicate the outlook.
The tariff and protectionist policies proposed by newly elected President Trump are also attracting attention. He plans to impose substantial tariffs on imports from Mexico, Canada, and Asia, which could raise production costs for businesses while further exacerbating inflationary pressures. This policy uncertainty could affect the Fed's interest rate cut pace in the short term, limiting the space for gold price increases. Analysts believe the Fed may only cut rates twice in 2025, rather than the previously expected multiple cuts.
Meanwhile, recent statements from Federal Reserve officials also show their efforts to balance controlling inflation and stabilizing the labor market. San Francisco Fed President Daly and Richmond Fed President Barkin both stated that inflation risks remain, and policy rates need to remain restrictive to ensure economic stability. However, they also emphasized the desire to avoid causing too much damage to the labor market.
Despite the strong dollar putting downward pressure on gold, market uncertainty remains. On one hand, the specific implementation timing and impact of the new government's policies are still unclear; on the other hand, trade environment uncertainty may encourage businesses to stock up in advance, boosting demand. Additionally, inflation pressures and policy changes may enhance gold's appeal as a safe-haven asset.
Looking ahead to this week, investors need to closely monitor the direction of Fed policy, the new government's economic agenda, and further dynamics in the dollar and gold markets. In the short term, gold prices may continue to be suppressed by the strong dollar, but safe-haven demand could provide some support for gold bulls.
