Palladium prices fell on Friday as  the dollar edged down against most major rivals, while investors assess the likely path ahead for US policies. 

A series of stimulus measures launched by China last year to boost the real estate market failed to buoy the market sufficiently. 

A major reason is Chinese Banks’ doubts and refusal to lend new credit to the struggling sector.

On the other hand, consumer prices in China continued their slowdown in January for the fourth straight month, hinting at deflation. 

Official data showed consumer prices fell 0.8% in January  y/y after a 0.3% drop in December.

However, consumer prices did rise 0.3% m/m after a 0.1% increase in the previous month. 

Producer prices fell 2.5% y/y in January, after a 2.7% tumble in December. 

China’s economy grew by 5.2% in 2023, passing the official target of 5%, however the recovery seems shaky in the eyes of many investors. . 

On another front, Fed Chair Jerome Powell said in a Sunday interview that he expects only three Fed rate cuts this year, and he doesn’t expect a cut in March. 

Minneapolis Fed Chair Neil Kashkari warned today from cutting rates too quickly, as current tight conditions haven’t yet impacted all aspects of the US economy sufficiently. 

Investors expected six Fed rate cuts this year, and such optimistic forecasts sent US stocks sharply higher.

Otherwise, the dollar index stabilized at 104.1 as of 16:48 GMT, with a session-high at 104.2, and a low at 103.9. 

Palladium March futures fell 3.1% as of 16:50 GMT to $864.5 an ounce. 

Global oil prices rose on Friday for the fifth straight session, hitting a week high and on track for a weekly profit amid growing concerns about Middle East tensions.

Prices are also boosted by expectations of slower growth in US crude production this year, overshadowing data that showed a large US crude inventory buildup last week. 

Crude Prices

US crude rose 0.45% to $76.72 a barrel, a week high, while Brent added 0.4% to $81.95 a barrel, also a week high.

US crude rallied 3.25% on Thursday, while Brent added 3.1%, the fourth profit in a row. 

Weekly Trades 

Global oil prices are up 5.5% so far this week on track for the third weekly profit in the last month.

Middle East Tensions 

Israel Prime Minister Benjamin Netanyahu refused a potential ceasefire in the war with Gaza, leading to more tensions in the Middle East. 

Otherwise, the US forces killed an important leader for an Iran-backed militia by a drone in Baghdad in response to recent attacks on US forces. 

The US continues to target sites in Iraq and Syria used by Iranian forces and their allies. 

US Production 

The Energy Information Administration now officially expects that US production won’t surpass the record high of 13.3 million bpd touched in December 2023 until February 2025. 

The EIA cut its forecasts for local oil production growth in 2024 to just 170 thousand bpd, compared to 1.02 million bpd in 2023.

US Stocks

The Energy Information Administration reported a buildup of 5.5 million barrels in US crude stocks last week to a total of 427.4 million barrels, while analysts only expected a buildup of 1.7 million barrels.

Gasoline stocks fell 3.1 million barrels to 251 million barrels, while distillate stocks tumbled by 3.2 million barrels to 127.6 million barrels. 

Silver prices rose in European trade on Friday, extending gains for the second day off two-week lows amid short-covering.

Demand is expected to improve on precious metals amid the New Lunar Year holiday, while Chinese authorities take new measures this week to boost the economy and underpin demand. 

Silver Prices Today

Silver prices rose 0.6% to $22.72 an ounce, after rising 1.65% on Thursday, the second profit in three days away from a two-week trough at $22.15. 

Chinese Demand 

The new lunar year in China starts tomorrow, February 10, and continues for 15 days, and is expected to be a year filled with “positive energy” according to Chinese astrology. 

During the festivals, demand usually spikes on jewelry of all kinds, with people exchanging gifts and wearing new jewelry items as part of the traditions. 

It’s now expected that the new year in China will witness one of the biggest spikes on precious metals and jewelry so far. 

Additionally, Chinese authorities starting taking new stimulus measures to boost economic activities in the country, which is expected to boost demand on industrial metals as well.

Silver Institute 

The Washington-based Silver Institute said in its latest report that 2024 will be a “fantastic year” for the white metal, with prices potentially rising to 10-year highs.

The institute expects silver demand to hit 1.2 billion ounces in 2024, the second highest on record. 

The non-profit organization said that strong industrial activities will drive demand on silver, as manufacturing scales up worldwide this year. 

Gold prices fell in European trade on Friday, extending losses for the third straight session under pressure from higher US treasury yields, and following bullish remarks from Fed officials.

Strong US data and remarks from Fed officials hurt the odds of a US interest rate cut in March and May. 

Gold Prices Today

Gold prices fell 0.2% to $2,030 an ounce, with a session-high at $2,035, after losing 0.1% yesterday, the second loss in a row as the dollar gained ground.

US Yields 

US 10-year treasury yields rose by over 0.4% on Friday, extending gains for the third straight session and almost hitting multi-week highs, hurting non-yielding assets. 

Yields added 15 basis points this week as investors changed the prospects of upcoming US rate cuts following recent strong data and bullish remarks by Fed officials.  

US Economic Flexibility 

Recent US data showed unemployment claims fell more than expected in yet another sign of strength and resilience by the US economy. 

US Remarks 

Several US Fed officials dismissed the need for early US rate cuts and policy easing this year in light of recent data.

Richmond Fed President Thomas Parkin said that Fed policymakers have ample time to decide on US rate cuts.

Minneapolis Fed President Neil Kashkarei said the Fed has time to study recent data before deciding on rate cuts and policy easing.   

Chicago Fed President Austan Goolsbey said he’s like to see more positive inflation data before deciding on rate cuts. 

 US Rates

The odds of a 0.25% interest rate cut in March fell to just 17.5%, while the odds for such a cut in May fell to 62%. 

The SPDR

Gold holdings at the SPDR Gold Trust rose 1.44 tonnes yesterday to a total of 843.66 tonnes, away from August 2019 lows at 842.22 tonnes.