After increasing to $1,425 an ounce following Fed Chair Jerome Powell’s dovish statements, gold fell due to strong inflation data released in the US yesterday, however yellow metal continued to hold tight above $1,400 on Friday. Trade tensions between the US and China escalated again following US President Donald Trump saying that China was not living up to its promises it made on buying agricultural products from the US. In the meantime, data released today in China, where the economy has been hit by global economic slowdown and trade dispute with the US, showed that exports declined in June while imports contracted more than expected.
Gold prices had declined following strong inflation data in the US after increasing to $1,425 an ounce due to Powell’s dovish statements signalling a rate cut at the end of July. However, since escalated trade tensions and dovish Fed dominated the expectations, yellow metal managed to consolidate above $1,400 an ounce on Friday.
As of 15:23 GMT+3, spot gold was trading at $1,406.22 an ounce while dollar index was at 97. US 10-year Treasury yield increased to 2.122.
CMC Markets chief market strategist Michael McCarthy said on Reuters that given slightly weaker dollar, tensions in the Middle East and prolonged trade dispute between the US and China, all things were supportive for gold while adding strong inflation affected rate cut expectations but it had not changed the direction.
Fed Chair Jerome Powell reiterated on Thursday that global economic slowdown and uncertainty around trade disputes continued to weigh on US economic outlook while adding that slowed down business investments and kept his dovish stance. Fed is expected to cut the rates by 25 basis point at the end of July but expectations for a second rate cut this year decreased due to strong US inflation data.
Trade tensions between the US and China escalated again following US President Donald Trump’s statement yesterday. Trump said China was not living up to its promises it made on buying agricultural products from US farmers while hoping that it would start soon. However Chinese Commerce Department spokesman Gao Feng said that this was an important issue to be discussed while leaving the claim that China promised to buy agricultural products from the US unconfirmed.
In the meantime, data released in China, where the economy has been hit by slowing global economy and trade dispute with the US, showed that imports contracted more than expected by 7.3% in June while exports declined by 1.3%. As additional tariffs imposed on Chinese products in May continued to hurt already weakening Chinese economy further, weakness in domestic demand persisted given contracting imports despite economic stimulus measures taken by Chinese government.