China PPI rose by 6.9% year on year in September, topping the street’s forecast of 6.3%. 

This indicated that the factory gate price expanded for a 13th consecutive month, driven by improved economic conditions and higher construction spending. Strong PPI data is widely viewed as a positive signal to raw material prices, which may help to boost industrial commodity prices worldwide. Higher factory gate prices will also boost other nations’ imported inflation. 

Meanwhile the CPI index rose moderately, at 1.6% on a year-on-year basis, sending no pressure to policymakers to change their neutral monetary policy. 

The Hang Seng Index extended its gains on Monday to 28,692 points – a level not seen since December 2007. The rest of Asia climbed except for China A-shares, which remained largely disconnected from the rest of the world.

The 19th Communist Party Congress will start on Wednesday in Beijing. The twice-a-decade congress will determine the political power transition within the Party, and set the framework for the next five years. Stability and politics are likely to be on top of President Xi’s agenda this year. He is widely viewed as the most powerful leader since Chairman Mao Zedong, and he is going to further strengthen his political power and ensure social stability over the next five years. He will probably address the ‘one-belt-one-road’ infrastructure project as one of his most important political assets as well. Economic reforms and debt reduction, however, are unlikely to be his focus.

The US earnings season continues to send positive surprises to investors, fuelling the rally of US equities and the dollar last night. US dollar index December contracts have rebounded to the 93.2 area from 92.6 a week ago. The stronger dollar suppressed the rally of precious metals, with gold and silver prices slumping from recent highs. 

Technical Analysis:

Gold - Cash

  • 10-Day Simple Moving Average and SuperTrend both sloped upwards
  • Facing some resistance at the US$1,303 area (38.2% Fibonacci retracement)
  • Strong support level at the US$1,263 area (61.8% Fibonacci retracement)
  • Momentum indicator MACD is still trending upwards, suggesting bullish momentum dominates

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