There has been a correction in gold prices following slight recovery in the markets due to investors’ increasing expectations for a rate cut, after yellow metal reached 1-week high following weak manufacturing data all around the world released earlier this week. However this correction was limited ahead of non-farm payrolls report due to be released tomorrow in the US while the outlook looks positive for gold despite short-term correction. In the meantime, it was announced that US and Chinese officials would have a phone call next week following trade truce between the sides at G20 and face-to-face meetings were expected to resume soon. After weak manufacturing data released earlier this week, data released today showed retail sales in Eurozone decreased in May.
Amid trade truce between the US and China, global growth worries rose following weak manufacturing data all around the world while gold prices were still holding tight on Thursday despite slipping from 1-week high due to increasing risk sentiment with rate cut expectations.
As of 14:26 GMT+3, spot gold was trading at $1,414.48 an ounce while dollar index was steady at 96.74. US 10-year Treasury yield did not change at 1.95 since US markets are closed today.
Geojit Financial Services head of commodity research Hareesh V said on Reuters that there was more interest in risky assets and a technical correction in gold prices while adding outlook for yellow metal was still positive. Argonaut Securities Helen Lau said weakness in US 10-year yield was another factor that increased bullion’s appeal.
It was announced that trade talks between US and Chinese officials would resume next week after sides agreed on a trade truce following Trump-Xi meeting at G20 and decided to resume negotiations. White House economic advisor Larry Kudlow said on Wednesday that trade representatives would have a phone call next week while adding face-to-face meeting would be held soon even though he did not state precisely when. However, it is not expected that trade truce will quickly lead to a trade deal as US officials stated earlier that sides would need to solve problems regarding fundamental differences and a trade deal would need time. On the other hand, data released yesterday showed, despite all the measures taken by the US regarding trade protectionism, US trade deficit with China increased by 12.2% to $30.2 billion in May as imports from China increased by 12.8%.
In the meantime, after weak manufacturing data showed Eurozone economy continued to slow down, data released today showed that retail sales also declined in May, signing that economic slowdown in Eurozone possibly persisted in the second quarter. Retail sales fell by 0.3% in May on monthly basis while it increased by 1.3% annually, slowing from 1.8% in April. European Central Bank stated earlier that it would follow expansionary monetary policy in case of that Eurozone economy continued to slow down and weakness in inflation persisted. ECB is expected to cut the rates either in July or September.