Gold holds steady on Wednesday as dollar index inches up amid equities are mixed because of increasing worries about recession due to weakness in the U.S. T-bill yields. According to data released yesterday in the U.S., housing starts were below expectations in February while consumer confidence weakened in March which proves economic slowdown in the early year is becoming more evident. By the way, U.S. and China will be resuming next phase of trade talks in Beijing on Thursday. In the meantime, European Central Bank (ECB) President Mario Draghi said in his speech today that he expects foreign demand to weaken more while underlining low inflation and downside risks in the Eurozone economic outlook. In the UK, as uncertainty remains around Brexit, British parliament will be voting couple of alternatives to current Brexit deal today.
While dollar index inched up on Wednesday, gold prices held firm amid increasing concerns of economic slowdown due to weakness in the U.S. Treasury bill yields.
As of 15:19 GMT+3, spot gold was trading at $1,317.35 while dollar index was higher to 96.75. U.S. 10-year Treasury yield fell down to 2.389, which was the lowest in 15 months.
According to data released in the U.S. yesterday, housing starts dropped significantly in February while consumer confidence was below expectations with the reading of 124.1 in March. This provides more evidence of slowdown in the U.S. economy early this year.
While next phase of trade talks between U.S and China is under spotlight, U.S. trade representative Robert Lighthizer said in an interview that they were working real hard to reach a trade deal but added he was “not necessarily hopeful” that would happen. While U.S. officials expressed their concerns about China stepping back from earlier promises, China side complained about these promises being one-sided. Earlier in this month, it was claimed China side scaled back promises on important issues like intellectual property rights and technology transfer due to the U.S. being reluctant to guarantee lifting tariffs completely. While two leaders will likely meet in late April, some analysts think trade tensions between two countries will remain even if a deal is reached.
In the meantime European Central Bank (ECB) President Mario Draghi said that he expected foreign demand to continue ebbing while underlining weakness in inflation and downside risks in Eurozone economic outlook. Draghi said they would continue stimulating Eurozone economy and added planned interest rate hikes would be delayed if necessary. ECB had downgraded its Eurozone growth expectations and announced a new long term refinancing program earlier this month.
In the UK, as Brexit uncertainty remains, there will be couple of vote for alternatives to Brexit in House of Commons, which took temporary control of parliamentary timetable earlier. House of Commons President John Bercow will decide which notions to be voted but these alternatives include second referendum, cancellation of Brexit and trying to reach a new customs union with the EU after the divorce. By the way, according to The Guardian, EU would have offered to postpone departure date till 31 March 2020 if British Prime Minister Theresa May had requested a long term delay to Article 50. This option will likely be on the table if May goes back to Brussels after having failed passing her deal through parliament. Currently, EU postponed Brexit unconditionally until 12th of April while Article 50 will be delayed to 22th of May on condition of Brexit deal being approved by the British parliament.