After increasing up to $1,428 an ounce by finding support from weaker dollar due to worse-than-expected housing starts data released in the US yesterday, gold prices declined due to profit taking but yellow metal holds tight amid rising rate cut expectations and ongoing trade dispute between the US and China. In Fed’s Beige Book which includes Fed’s evaluation of US economic outlook, it was stated that US economy grew at moderate rate and economic outlook was generally positive while adding US trade policies continued to be cause of concern. Data released today showed that in Japan ,where the economy has been suffering from slowing global economy and trade tensions, exports and imports continued to weaken in June. On the other hand, retail sales increased unexpectedly in June.
Gold prices declined on Thursday due to profit taking after it hit $1,428 an ounce by finding support from weakening dollar following weak US housing starts in June, however the fall seems to be limited.
As of 14:00 GMT+3, spot gold was trading at $1,417.36 an ounce while dollar index edged down to 97.21. US 10-year Treasury yield was up to 2.075.
Inditrade Derivatives & Commodities commodity director Harish Galipelli said on Bloomberg that if Fed cut the rates to boost slowing economic activity, this would increase gold’s appeal while underlining outlook for yellow metal was positive despite recent corrections.
In its Beige Book, which includes Fed’s evaluation of economic outlook, Fed stated that US economy grew at moderate rate in recent weeks as consumers continued spending and outlook was generally positive for US economy despite disruptions caused by US trade policies. Report said employment continued to increase and labor market remained tight while underlining slowing global economy and Trump administration’s trade policies caused doubts otherwise positive outlook and added this shifted some Fed officials’ minds towards a rate cut.
According to data released today in Japan where the economy has been weighed on by global economic slowdown and trade dispute between the US and China, exports and imports continued to decline in June. Exports contracted seven months consecutively and declined by 6.7% while imports fell by 5.2%. Weakness in exports remained with slowing Chinese economy while hopes for compensating the weakness in exports with increasing domestic demand was dashed due to falling imports.
Norinchukin Research Institute chief economist Takeshi Minami said on Reuters that Bank of Japan and the government expected economy to recover in the second half of the year however this would likely be delayed due to ongoing US-China trade dispute, worsening European economy and slowing US economy.
In UK, data showed retail sales unexpectedly increased in June by 1% on monthly basis and by 3.8% annually. It is widely expected by economists that UK economy is in danger of shrinking in the second quarter due to stockpiling ahead of Brexit which was supposed to take place at the end of March, but the risk could be eased by strong retails sales. Nevertheless, uncertainty around Brexit and risk of no-deal Brexit still being high continue to cause concerns on economic outlook in UK.