Palladium prices rose on Friday as the dollar declined against a basket of major rivals on track for the best weekly performance in a year.

Investors are betting the Federal Reserve has reached the end of the policy tightening cycle, in turn pressuring dollar and US treasury yields. 

Now traders expect the Fed to cut interest rates by next May as inflation continues to slow down. 

Recent data indicated US consumer prices stabilized in October m/m, while core prices rose just 0.2%, while producer prices slowed down to 3-1/5 year nadir. 

A potential cut in interest rates will underpin non-yielding assets such as gold and industrial metals. 

Dollar on the other hand is heading for a weekly loss, making palladium and other metals cheaper to holders of other currencies. 

The dollar index fell 0.3% as of 15:45 GMT to 104.01, with a session-high at 104.5, and a low at 103.9.

Gold spot futures rose 1.2% to $1,062.5 an ounce as of 15:46 GMT. 

Palladium is heavily used in the automotive industry, to reduce exhaust fumes. 

Global oil prices rose in European trade for the first time in four days off four-month lows on active short-covering.

Oil prices nonetheless are heading for the fourth weekly loss in a row amid renewed concerns about global demand especially in the US and China.

Global Oil Prices

US crude rose 1.4% to $73.86 a barrel, while Brent rallied 1.1% to $78.27 a barrel.

US crude swooned 4.8% on Thursday, plumbing a four-month lows at $72.22, while Brent slid 4.4% to $76.65 a barrel, the lowest since July 7. 

Weekly Trading

Oil prices are down 4.25% so far this week on track for the fourth weekly loss in a row.

Both OPEC and the International Energy Agency now expect supplies to decline in the fourth quarter, however, a series of weak US, Chinese, and European data sparked concerns about global fuel demand. 

US Stocks 

The Energy Information Administration reported a spike of 17.5 million barrels in US crude stocks in the last two weeks.

Total stocks are now up up to 439.4 million barrels.

US Production

The EIA reported no change in US crude production last week, remaining at 13.2 million barrels, the highest in US history.

Chinese Demand

Chinese refinery output declined once again in October according to latest official data, as demand on fuel declines.

Chinese housing prices also fell for the fourth straight month in October, while real estate sales tumbled by 20.33% y/y.

Analysis

Analysts notice that technical factors limit upward movements in oil prices, in addition to clear global pressures due to changes in the demand-supply dynamics worldwide.

Silver prices rose in European trade while maintaining gains for the fifth straight session, almost touching two-month high and on track for the largest weekly profit in four months amid strong demand on the white metal.

Strong demand on non-yielding assets grew as US 10-year treasury yields tumbled, and following strong Chinese data. 

Silver Prices

Silver prices rose 0.8% to $23.93 an ounce, after rising 1.3% on Thursday, the fourth profit in a row, marking a two-month high at $24.07 an ounce following weak US data. 

Weekly Trading 

Silver prices are up 7.5% so far this week on track for the second weekly profit in three weeks, and the largest since July. 

US Yields 

US 10-year treasury yields slid 1.1% on Friday, extending losses for the second loss in a row, and plumbing two-month lows at 4.391%. 

Such developments in the US bonds sector came after US inflation and unemployment claims data hurt the odds for another US Federal Reserve interest rate hike next month.

Such data bolstered the case for the end of the current cycle of policy tightening in the US. 

The odds for a 0.25% interest rate hike in December tumbled to just 1%.

Traders now expect the first interest rate cut by the Federal Reserve in May 2024. 

Chinese Demand 

Earlier data showed China's industrial output rose 4.6% in October, improving from 4.5% in September.

Retail sales rallied 7.6% in October, the fastest such pace since May, accelerating from 5.5% in September. 

Such data showcases the continued strength of the Chinese economy in the fourth quarter as the Chinese government continues to launch measures to stimulate and boost economic activities. 

Sterling fell in European trade on Friday on track for the third straight loss against the dollar away from a two-month high on active profit-taking.

Grim UK retail sales data in October indicated the likely recession of the UK economy in the final quarter of the year, and paved the way for an early interest rate cut by Bank of England next year. 

GBP/USD

GBP/USD fell 0.3% to 1.2380, with a session-high at 1.2422, after closing down 0.1% on Thursday, the second loss in a row on profit-taking off two-month highs at 1.2505. 

Grim Data

UK data showed retail sales fell 0.3% in October, while analysts expected a rise of 0.5%. 

Retail sales merchants said in the report that higher living costs and the wet weather in October contributed to the decline.

Such data clearly indicates the rapid recession of the UK economy in the fourth quartet of the year, and will likely force Bank of England to cut interest rates earlier than expected in 2024. 

Goldman Sachs expects Bank of England to cut interest rates by 25 basis points in February 2024. 

Earlier UK consumer prices data this week also showed prices have slowed down to two-year lows.

Such data reduces the pressure of inflationary pressures on BoE and confirms the end of the current cycle of policy tightening.