In January, the US Q4 2024 GDP grew 2.3% annualized, below the expected 2.6% and prior 3.1%. Manufacturing PMI continued rising, while December CPI and PCE were in line with forecasts, easing inflation concerns. However, the Fed held rates steady in its first 2025 meeting, citing persistent inflation uncertainty, despite overall economic stability.
The US economy has seen increased volatility from high rates and political transition, with resilient consumer demand but cautious business investment and inventory management, as inflation persists. Post-rate cut expectations, gold prices and producers have rallied.
Domestically, the official manufacturing and non-manufacturing PMIs dipped in January, as early Chinese New Year holiday demand was pulled forward. The economy remains in a tug-of-war between internal and external drivers, with the recovery still unsteady.
Moreover, the unveiling of Deepseek’s V3 model – rivalling OpenAI’s $500 million effort at under $6 million cost – triggered a 17% plunge in Nvidia shares and a tech sector adjustment, boosting Chinese tech stocks.
As February begins, the return of Trump-era tariffs has raised concerns about precious metal import levies. The resulting COMEX-London gold price premium has prompted traders to continuously shift gold from London to New York for arbitrage, further exacerbating the physical gold shortage in London and driving gold prices higher. While the near-term positive sentiment may eventually subside, the underlying long-term fundamentals continue to provide support for gold prices.