Gold looks to extend a five-week rally this week, and hit a ten-week high of $1,279 overnight after buy stops were triggered at $1,275. All precious metals eased in Europe, as the Ifo German business climate index hit a 2-1/2 year high of 110.6. A fall in base metals caused silver and the platinum group metals (PGMs) to give back gains on Friday as the emerging market meltdown gained momentum.
The dollar also fell in Europe, but regained positive territory in early U.S. trading. The euro had been boosted by the Ifo report, and the yen had hit a seven-week high on Asian safe haven demand before falling. Japan's trade deficit for 2013 came in at nearly double 2012, due to oil prices and a depreciating yen.
The Nikkei hit a two-month low on the news, while the Hang Seng in Hong Kong hit a five-month low. Shanghai shares were also down, as the Chinese coal industry's exposure to under the table "shadow loans" becomes more apparent.
In Europe, the good news from Germany wasn't enough to help stocks, as the market declined for the third straight day.
Tomorrow starts the January Federal Reserve Open Market Committee meeting, where they will decide whether to keep the new $75 billion a month bond and mortgage purchase program, revert back to $85 billion a month, or cut quantitative easing another 12% to $65 billion a month. Outgoing Fed Chairman Ben Bernanke has said that Fed policy cannot be predicated on saving emerging market economies, as the Fed mandate is only to help the American economy.
The committee's conclusions will be announced Wednesday afternoon, and will be a major market mover for both commodities and equities. Asian markets will be closed Thursday and Friday this week for Chinese New Year, which will take the major area of physical demand off the table temporarily. China is now the world's leading consumer of gold, as well as the world's leading producer of gold. 1,153 tonnes of gold was imported through Hong Kong into China in 2013. Add to this total 440 tonnes of domestic production, plus imports through Shanghai and Singapore, and Chinese gold consumption is likely approaching three quarters of global mining output a year.
U.S. stocks are set to open higher this morning, as the rest of the world's indices continue to bleed red. Wall St. is being buoyed by better than expected earnings from Caterpillar, and anticipation that Apple's earnings (which will be reported after the close) will show a good holiday season.