On Monday, a new commercial survey unveiled Japan's economic dynamics for December, illustrating a mixed bag of outcomes for different sectorsThe manufacturing sector continued its descent, marking a sixth consecutive month of contraction, while the services sector maintained its growth trajectoryThis situation underpins Japan's increasing dependency on services, particularly in light of the ongoing challenges faced by manufacturersThe Jibun Bank's preliminary reading of the purchasing manager's index (PMI) indicated a slight dip from November’s 49.0 to December’s 49.5. Despite this marginal decrease, the index has remained below the critical threshold of 50.0 since June, which signals a persistent contraction in manufacturing activitiesUsama Batty, an economist from S&P Global Market Intelligence, highlighted the widening gap in demand between services and manufacturing, noting that service companies saw the fastest growth in new business in four months, contrasting sharply with product manufacturers who grappled with significantly declining orders.

Furthermore, sentiment within the manufacturing sector has plummeted, hitting a nadir not witnessed since May 2022. Additionally, input inflation has surged to its highest level in four months, with output prices reaching a peak not seen since July, indicating the sustained cost pressures faced by businesses

This situation calls for introspection regarding Japan’s reliance on manufacturing, once considered its economic backbone, but now seemingly faltering in the shadow of a burgeoning services sector.

In a broader context, the World Gold Council, through extensive analysis, has made predictions regarding gold prices under the condition that market environments remain relatively stableTheir 2025 gold outlook report suggests a gradual increase in prices at a measured pace, should global economic conditions align with prevailing market expectationsNotably, this report warns that if demand from central banks exceeds forecasts, or if financial markets deteriorate severely, gold could experience substantial upward momentumNevertheless, a critical alert has been raised: a reversal in the interest rate cycle could introduce a multitude of challenges and uncertainties within the gold market.

Looking ahead to 2024, the gold market is poised for its most impressive annual performance in over a decade

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The year 2024 witnessed significant price surges, with gold almost breaching the historical threshold as it touched $2,790.07 per ounce in late OctoberDuring the third quarter of 2024, total demand for gold exceeded $100 billion for the first time, underscoring its robust appeal as a safe-haven assetDespite a volatile phase following key events in early November that triggered a severe sell-off, gold has remarkably maintained an overall increase exceeding 28% year-to-dateThis scenario presents a striking contrast to the traditional stereotypes of gold as a safe-haven asset inconsistent in turbulent periods.

Investors keen on market cues will be watching for significant data releases today, including the final manufacturing PMI for the Eurozone in December, the preliminary services PMI for the UK, as well as the manufacturing index from the New York Fed and the initial PMI for the US manufacturing sector

These data points are critical indicators of economic health and can potentially sway market sentiment.

In the currency markets, the Gold/US Dollar dynamics have shown fluctuations in recent sessionsLast Friday, gold experienced a downward trend, recording its lowest price in four trading days, trading around the $2,653 markA continued profit-taking trend exerted downward pressure on gold prices, alongside dampened expectations for interest rate cuts from the Federal Reserve and rising US Treasury yieldsStill, the anticipation of a Fed rate cut in December seems to be capping any sharp declines in goldToday's price resistance is noted near $2,670, with support resting around $2,640.

Meanwhile, the USD/JPY pair demonstrated an upward movement last Friday, pushing towards the 154.00 mark—its highest level in 13 trading days, trading around 153.60. The sustained support for the exchange rate has stemmed from softening expectations of interest rate hikes by the Bank of Japan, while waning expectations of rate cuts from the Federal Reserve continue to reinforce the value of the dollar against the yen