After having weekly gain last week, despite considerably strong US payrolls data, by finding support from weak global economic data, gold prices edged down on Monday while attention turned to trade talks later this week. High level trade talks between the US and Chinese officials will start on Thursday however it is claimed that Chinese side is reluctant to agree on a comprehensive trade deal that the US insist and extend of issues to be negotiated in the talks are narrowed. In the meantime, it is uncertain whether weak economic data will lead to further rate cuts, some regional Fed presidents stated at the weekend that the economy was in a good place and there was no necessity for another rate cut. On economic data side, data released today showed factory orders in Germany declined more than expected in August.
Gold prices edged down but kept close to $1,500 an ounce on Monday while attention turned to trade talks later this week.
As of 15:53 GMT+3, spot gold was trading at $1,498.81 an ounce while dollar index was down to 98.77. US 10-year Treasury yield was up to 1.544.
CMC Markets market analyst Margaret Yang Yan said on Reuters that there was uncertainty around trade talks and this was reflected in rising demand for safe haven while adding that a strong catalyst was needed for gold to break out its trading range of $100.
High level trade talks between US and Chinese officials are due on Thursday however, according to Bloomberg sources, China is reluctant to agree on a comprehensive trade deal that the US insists. According to the claim, China narrowed the extend of issues to be negotiated in the trade talks and Chinese Trade Representative and Vice Premier Liu He would bring a proposal to Washington that excluded China’s commitments regarding its industrial policies and government subsidies, which are significant for US side. However, this situation risks trade dispute to continue and tensions to escalate as US President Donald Trump stated repeatedly that he would only agree on a comprehensive trade deal with China.
In the meantime, as recession worries increased due to recent weak economic data all around the world, some regional Fed presidents said at the weekend that US economy was in good place and there was no need for further easing. Kansas City Fed President Esther George said the economy was in a good place with low inflation, low unemployment and moderate growth while adding that she refused the approach of trying to increase inflation by cutting the rates since it was due to global forces and US monetary policy could do little to affect it. George said, monetary policy could be adjusted if incoming data indicated weaker economy while underlining that interest rate adjustment to quickly return back to 2% inflation could require aggressive actions and this would lead to misallocation of resources and financial imbalances.
In addition to this, Boston Fed President Eric Rosengren said they were getting to a point where they would see a kind of employment in a stable economy while adding that the question was whether the conditions would worsen and possible change in consumer side of the economy. Rosengren said, there would be incoming data ahead of next FOMC meeting and what he would look would be whether consumers started changing their minds.
On economic data side, data released today showed factory orders in Germany, where recent data showed further contraction in manufacturing sector, declined more than expected in August. According to the data, factory orders declined by 0.6% while demand for capital goods fell 1.6%. Economy Ministry said weak demand in the industry remained and industrial sector was under pressure. Due to US-China trade war and Brexit uncertainty alongside with global slowdown, no quick recovery is expected in German manufacturing.