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Yes, gold is historically a hedge against inflation. So, it may be a mystery as to why gold rallied after the Producer price index came in much softer than anticipated. The PPI price index increased 0.2% in December, less than the 0.4% increase in November and below the Dow Jones consensus estimate of 0.4%. Excluding food and energy, the core PPI was at zero compared with the forecast for a 0.3% rise.
Ok, I know it’s not a mystery.
It’s the US dollar, one of the many fundamentals that impacts the price of gold. The value of the dollar hit a two year high as it has been surging in recent weeks.The reason why it’s been surging is because the world has been backing off expectations that the Federal Reserve is going to be able to continue to cut interest rates.The strong Jobs report on Friday showed Total nonfarm payroll employment increased by 256,000 in December, and the unemployment rate changed little at 4.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, government, and social assistance. Retail trade added jobs in December, following a job loss in November.That report really sent the dollar soaring, yet the producer price index brought that dollar back down.The key thing today for gold may be the Consumer Price index if that comes in softer than expected showing less inflation than we could see gold really start to surge.Gold has to keep up with Bitcoin as an alternative investment central bank buying around the globe continues to be strong now that President Trump is talking about a Fort Knox of cryptocurrency.Gold is going to continue to have to keep pace we still think that gold will see $3000 an ounce and that’s cheap compared to the price of Bitcoin.Copper also got a boost on not only the reversal in the dollar but also taught that President Trump is going to ease into tariffs on other countries.
One of the things that has been holding back the price of copper is concerned that they won’t get into a trade war with China a trade war with China could reduce demand for copper at least in the short term .
We still think that copper has extreme value. At this level we still see a coming supply shortage copper demand of course is going to be strong as they have to rebuild California.Fast Markets is reporting that An EU decision to limit steel and aluminum scrap exports will further trouble foreign markets, which are already reeling from the bloc’s decision to implement CBAM (Carbon Border Adjustment Mechanism), they said. CBAM targets imports from countries where steelmaking processes and carbon emissions are not compliant with the EU’s stricter standards.“The European Steel Association (Eurofer) and the European Aluminum stand together in calling for action to secure a sustainable, resilient and competitive EU,” they said in a joint statement. “Scrap is Europe’s energy, emissions savings, and industrial future,” they added.The two bodies said that steel and aluminum are “the backbone of Europe’s clean and innovative technologies”, powering wind turbines, solar panels, batteries, as well as the digital, aerospace and defense sectors. Keeping the recycling of old steel and aluminum in Europe is essential to decarbonizing production and saving the energy needed for primary production, a reduction that can reach up to 95% in the case of aluminum and 80% for steel, they said.Steel scrap exports have more than doubled to 19 million tonnes in 2023, from 9 million tonnes in 2015, draining resources that are vital for Europe’s climate and circular economy goals, energy security and industrial resilience, according to the two industry bodies. EU steel scrap exports hit a peak of about 19.5 million tonnes in 2021, they said. EU aluminum scrap exports are expected to hit a new record in 2024, with 1.3 million tonnes being sold after peaking at 1.2 million tonnes in 2023, they added.“We urge the European Commission to act now to preserve European scrap and boost its supply by reciprocating scrap export limitations with third countries [non-EU] imposing trade barriers, start using the new tools of foreign subsidies regulation, strengthening existing EU rules through the Waste Shipment Regulation, Critical Raw Materials Act and End-of-Life Vehicles Directive,” the statement said.One key reason for scrap leakage is the higher prices paid by third countries’ recyclers, who value scrap as a vital resource to boost their recycled production, while cutting their carbon emissions and costs, according to Eurofer and European aluminum.
“These countries are investing heavily to boost their recycling capacities – often by using money from subsidies – and that creates additional unfair market competition and overcapacities to the detriment of European competitiveness,” the joint statement said.
For example, Chinese recycling capacity surged to 21 million tonnes, from 8 million tonnes, with more increases projected in the coming years, they said.
“China will increase steel scrap recycling capacity by an extra 26 million tonnes by 2030, from 249 million tonnes in 2023,” they said. Moreover, the ability to recycle in those non-EU countries has been enhanced by their lower environmental, safety and labor standards and cheaper energy costs, they added.But the Association of German Metal Traders and Recyclers (VDM), a lobby and service association for the metal industry in Germany and Austria, said: “Proposing more protectionism to address trade challenges is deeply counterproductive. Economic bans and restrictions do not inspire innovation or drive sustainability – they create inefficiencies, reduce competitiveness, and weaken industries over time.”More By This Author:The Energy Report: Tariff Wiggle Room. Shakey Gold Shakeout – Manic Metals ReportThe Copper Squeeze – Manic Metals Report