The overnight trading session saw a slight increase in spot gold pricesDuring the session, gold reached a high of $2678.17 and dipped to a low of $2659.39 before closing at $2677.20. As of midday in Europe today, the upward trend in gold prices has continued, with the commodity hovering around the $2685 markThe rise in gold was met with mixed reactions in the stock markets, showing a complex relationship between equities and precious metals in the financial ecosystem.

Overnight, U.S. stocks displayed a patchy performanceThe major indices showed divergent trends, with the Nasdaq Composite falling for the fifth consecutive trading sessionBy the close of the market, the Dow Jones Industrial Average gained 0.52%, finishing at 42,518.28 points; the S&P 500 rose by 0.11%, to 5,842.91 points, whereas the Nasdaq dipped by 0.23%, resting at 19,044.39 pointsThis mixed performance highlights the volatility in the market as traders wait for significant economic data to guide their decisions.

On the news front, a report released by the U.SBureau of Labor Statistics on Tuesday noted that the Producer Price Index (PPI) for December saw a month-on-month increase of only 0.2%, lower than November's 0.4% and below the Dow Jones estimate of 0.4%. This undershot expectation showcases a softer inflation signal than anticipated by many market participants, leading to increased scrutiny of upcoming inflation data.

Furthermore, when excluding food and energy prices, the core PPI remained flat, contrasting with market expectations of a rise of 0.3%. After adjustments for trade services, the metric only showed a modest uptick of 0.1%. This disappointing data is now intensifying the market's focus on the upcoming Consumer Price Index (CPI) report, scheduled for release on Wednesday.

Investors are particularly keen to see the CPI figures released at 21:30 Beijing time, as they could be among the most pivotal inflation indicators in recent yearsA robust inflation reading may bolster views that interest rates will be held steady in 2025 or potentially increased, whereas soft numbers could ease such concerns

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Presently, the market anticipates that the CPI for December will maintain a month-on-month growth rate of 0.3%, while year-over-year growth is expected to rise from the previous 2.7% to 2.9%, marking a five-month peakThe core CPI, stripped of volatile factors like food and energy, is likewise projected to hold steady at a year-on-year increase of 3.3% but slow slightly from 0.3% to 0.2% month-on-month.

The prevailing sentiment on Wall Street suggests that even if the inflation figures meet expectations, it might not constitute good newsThe consensus leans toward the need for inflation results that fall below projections for a favorable market reactionA survey conducted by 22V Research revealed that 47% of investors expect the market's reaction to the CPI data to be risk-averse, while 29% feel it will be risk-onAn additional 24% believe the impact would be mixed or negligibleInterestingly, 53% of respondents indicated that financial conditions require tightening, underlining the apprehensive outlook among traders.

Additionally, traders are treating this CPI data as a pivotal guide for the Federal Reserve's interest rate trajectory this yearFranklin Templeton anticipates that the Fed may cut rates once or twice in 2025. According to the CME Group's FedWatch Tool, the market odds indicate an 80% likelihood that rates will remain in the current target range of 4.25% to 4.50% through March.

Notably, important speeches from key Federal Reserve officials are on the horizon, which could further influence market sentimentAt midnight Beijing time, New York Fed President John Williams is scheduled to deliver remarksWilliams, who also serves as Vice Chairman of the Federal Open Market Committee, holds permanent voting rights, making him a significant figure within the Fed's structure.

In addition to Williams, investors will hear from Richmond Fed President Tom Barkin, Minneapolis Fed President Neel Kashkari, and Chicago Fed President Austan Goolsbee throughout the trading day

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