After pulling back due to increasing risk sentiment as global uncertainties considerably resolved, gold prices continued to be under pressure following strong US data released on Thursday however worse than expected non-farm payrolls data released today supported prices. According to data, private sector added jobs above expectations in August while services sector expanded in the same month and increasing factory orders in July indicated that US economy continued to remain solid amid slowing global economy. In the meantime, it was reported that companies had been preparing to leave China to avoid the costs of US tariffs on China. In Europe, Germany’s industrial production declined in July after unexpected fall in factory orders in the same month, indicating weak start to the Q3.
Alongside with considerably resolved global uncertainties on trade front as well as in Hong Kong, Italy and the UK, gold prices continued to fall after US data indicated the economy continued to remain strong amid global economic slowdown, however non-farm payrolls which was below expectations supported yellow metal.
As of 15:33 GMT+3, spot gold was trading 1.512,55 an ounce while dollar index was at 98.45. US 10-year Treasury yield slightly recovered and was up to 1.605.
GoldSilver Central managing director Brian Lan said on Reuters that data released on Thursday was positive and caused gold prices to fall while adding that he expected volatility in gold market. However, Phillip Futures analyst Benjamin Lu said gold would remain vigorous due to global recession fears, higher geopolitical risks and expansionary US monetary policy in the Q3.
Data released in the US on Thursday showed private sector added 195,000 jobs in August, which was above expectations, and 184,000 of total jobs were created by services sector as it was reflected in the ISM services PMI which increased to 56.4 from 53.7. While private sector employment remains strong amid slowing economy, separate data showed factory orders increased above expectations in July by 1.4%. On the other hand, data released now by Bureau of Labor Statistics showed non-farm payrolls that increased 130,000 remained below expectations in August which will be supportive for gold prices.
According to a report by Nomura analysts, companies have been preparing to leave China to avoid costs of US tariffs on China amid ongoing trade dispute between two giant economies. The reports says the most beneficiary countries from this situation were Taiwan, Vietnam, Japan and Mexico while adding some of those countries encouraged their companies to “return home” by lowering costs of relocation. The report also says even though companies relocate some of their operations out of China, there are still many reasons for majority of the factories to stay in China due to its market power.
In the meantime, data released in Germany indicated worsening economic situation in Eurozone’s largest economy. Following weak factory orders, data released today showed industrial production unexpectedly fell in July. As industrial production fell by 0.6%, 2.7% contraction in factory orders was mostly due to falling orders from non-Eurozone countries. Thus, after starting the Q3 on the back foot, German economy is now facing a risk of another contraction in the Q3 after contracting 0.1% in the Q2, which would lead to a recession.