After recovering from two-month low by finding support from weaker dollar due to disappointing US manufacturing and employment data, gold keeps strong on Thursday. As recession worries increased in the US due to weak data released earlier this week, chances for a third rate cut at the end of the month by the Fed increased too. The New York Fed President John Williams said yesterday that there were signs of slowdown in the US economy and monetary policy should be positioned to support sustainable economic growth. In the meantime, World Trade Organization concluded that the US was right in the aviation dispute with EU and Trump administration announced additional tariffs on EU products including European aviation giant Airbus.
Alongside with weak manufacturing data all around the world, worse than expected US private sector employment supported gold prices and yellow metal kept tight on Thursday ahead of more comprehensive employment data due on Friday.
As of 15:33 GMT+3, spot gold was trading at $1,500.12 an ounce while dollar index was at 99.05. US 10-year Treasury yield was also down to 1.582.
OANDA analyst Jeffrey Halley said on Reuters that gold was used as a hedge against volatility in other markets while adding that safe haven demand increased as investors worried about global economy and trade alongside with recent sales seen in equity markets.
As recession worries increased after recent data showed US manufacturing contracted the worst in 10 years in the previous month and private sector employment disappointed, chances for a third rate cut by the Fed at the end of the month increased. The New York Fed President John Williams said yesterday that there were signs of slowdown in the economy and stated that monetary policy should be positioned to support sustainable economic growth. Williams also said the economy was in good place but the outlook was blurry due to uncertainties and risks.
In the meantime, World Trade Organization concluded the case between the US and EU regarding their aviation competition. WTO said on Wednesday that the US was right and US planemaker Boeing had lost equivalent to $7.5 billion due to EU subsidies to European planemaker Airbus and according to WTO rules, the US now has the right to impose tariffs equivalent to the same amount. Following the statement, the US said it would impose 10% tariff on Airbus and 25% tariff on other European products and it would take place as of October 18. The Airbus plane parts used by Boeing or Airbus’s Alabama operations will be excluded from the tariffs and the tariffs will not cover all $7.5 billion as the US side said they would keep their rights to increase or extend the tariffs depending on trade talks with EU officials. Therefore, US opened another front in the trade war ahead of high-level trade talks with China next week.