Trading in a narrow range following Fed, gold prices find support from weaker dollar due to some central banks, England, Swiss and Japan, keeping their rates on hold unlike Fed and ECB. Moreover, global growth worries backed yellow metal as OECD downgraded its growth forecast to the lowest level since the global financial crisis by stating that trade war weighed on global growth. In the meantime, China central bank lowered its one-year benchmark rate however the move was considered rather hawkish comparing to Fed and ECB. On trade front, it was claimed that the US would exempt some Chinese goods from tariffs imposed last year.
Trading in a range close to $1,500 an ounce, gold prices edged up on Friday by finding support from weaker dollar and global growth worries due to OECD downgrading its growth forecasts however possible positive developments calming trade tensions ahead of talks in October could further weigh on yellow metal.
As of 15:10 GMT+3, spot gold was trading at $1,500.76 an ounce while dollar index was at 98.43. US 10-year Treasury yield was up to 1.791.
CMC Markets chief market strategist Michael McCarthy said on Reuters that weaker US dollar supported gold and prices were stuck in a narrow range. McCarthy added that investors were looking for developments on trade front which could prompt next move in gold prices.
Unlike Fed and ECB, central banks in England, Switzerland and Japan kept the interest rates on hold yesterday. Bank of England stated Brexit uncertainty and slowing global economy weighed on the economy and kept the rates at 0.75% while reiterating that it would gradually hike the rates if no-deal Brexit was avoided and global growth slightly recovered. Swiss National Bank said deteriorating international economic environment would likely lead to economic slowdown and downgraded its growth forecasts while adding that inflation was weaker due to lower growth and inflation abroad. SNB kept the rates at -0.75%. Bank of Japan did not change its interest rates at -0.10% however announced whether the economy needed further monetary stimulus would be assessed in details in its next meeting in October.
In the meantime in China, where the economy has been facing ongoing economic slowdown, Chinese central bank lowered its 1-year benchmark rates to 4.20% from 4.25% on Friday days after it lowered required reserve ratios early September. The move was rather dovish comparing to Fed and ECB and indicated that the central bank was reluctant to go for aggressive easing however more easing will be needed to stop ongoing economic slowdown. Stimulus measures taken by the government and the central bank have not prevented further slowdown in the economy so far however the central bank might be reluctant to ease aggressively due to high debt level. On the other hand, some analysts say the measures taken so far was aiming to stop economic slowdown that would lead to growth below 6% in the Q3 rather than stimulating economic growth.
On trade front, it was claimed that the US was preparing to temporarily exempt 400 types of Chinese goods from the tariffs imposed last year after Chinese recently exempt 16 types of American products from tariffs. According to CNBC, it is not still clear what the overall value of the goods excluded from the tariffs will be but it was stated that the measure was likely taken by considering its effects on US economy rather than a change in US stance in the trade war with China. Official announcement is expected later today.