Gold prices hit $1,272 on Thursday, the lowest this year, as hopes increased on global economic outlook was not as concerning as previously thought due to the data released yesterday showing that Chinese economy grew above expectations in the first quarter, supported by better than expected industrial production and retail sales in March. According to Bloomberg, the US and China are preparing to announce a trade deal in early May and state the details of possible summit between leaders later in the month, following the next round of talks expected in late April. In the meantime, Federal Reserve states in its last Beige Book that labour market remains tight while economic activity grows at “slight-to-moderate” pace. St. Louis Fed President says weakness in economic outlook seen in the beginning of this year will recover in the coming months.
While safe haven appeal faded away due to easing concerns that the world economy would slow down significantly, following the date showing that Chinese economy grew above expectations in the first quarter by finding support from strong industrial production and retail sales, gold prices has seen the lowest level since late December at $1,272 on Thursday.
As of 15:12 GMT+3, spot gold was trading at $1,276.55 while dollar index increased to 97.31. US 10-year Treasury yield was down to 2.561.
OANDA senior market analyst Edward Moya said on Reuters that gold prices continued to weaken due to positive economic data while adding yellow metal was pressured by increasing optimism over trade talks that a deal would likely be reached soon.
According to Bloomberg, the US and China are aiming to announce in early May that a trade deal is reached. Noting that next round of trade talks is expected to start on April 29, sides will announce the possible deal early May and details of summit which will likely be held later that month. US President Donald Trump said earlier in April that a trade deal could be reached in four weeks while US Treasury Secretary Steven Mnuchin said sides were coming closer to the final round of trade talks.
In the meantime, US Federal Reserve stated in its Beige Book report, which indicates business sentiment over economy, economic activity grew slight-to-moderate in March and early April, while added labour market remained tight. It was also stated that prices increased since the last report while underlining that companies have responded to tight labour market by increasing wages.
St. Louis Fed President James Bullard said on Wednesday that economic weakness seen in the beginning of the year would recover in the coming months while adding worries on economic outlook would ease as well. He underlined that weakness in January and February would fade away while saying data would be much better in the second and third quarter and note yields would steepen. Recently inverted short and long term yields have been taken as a sign of upcoming recession and increased concerns on economic outlook.