Global growth worries due to inverted US 2/10 year yield curves alongside with disappointing data from China and Eurozone continued to support gold prices while yellow metal declined due to profit taking on Thursday but managed to increase again and kept tight above $1,500. According to data released today, Japan’s industrial production contracted less than previously anticipated in June while capacity utilization fell in the same month. In the UK, economic data continued to surprise ahead of Brexit expected at the end of October as today’s data showed retail sales were above expectations in July following positive inflation data released yesterday.
As worries on global economic outlook increased due to data released recently, gold prices continued to increase on Thursday after a quick pull back due to profit taking.
As of 14:25 GMT+3, spot gold was trading at $1,519.43 an ounce while dollar index was down to 97.84. US 10 year Treasury yield was also down to 1.537.
Phillip Futures analyst Benjamin Lu said on Reuters that there was rush into gold due to worsening sentiment while adding the economy was showing weakness and started slowing down in the second half of the year which would be supportive for gold prices.
While economic outlook worsens with recent data from China and Eurozone, bells are ringing louder for the global economy as US 2 and 10 year yield curves inverted on Wednesday for the first time since the global crisis which started in 2007 because this indicator preceded each recession since 1956. Therefore, US retail sales data due later today is expected to signal how badly US economy has been affected by deteriorating global economic outlook.
In the meantime, data released today in Japan showed industrial production contracted less than previously anticipated in June by 3.3% while capacity utilization declined by 2.6%.
In the middle of Brexit uncertainty in the UK, data showed today retail sales unexpectedly increased by 0.2% in July. More online shopping by consumers supported the data however retail sales increased 3.3% annually, below 3.8% in previous month. Moreover, core retail sales rose by 0.2% and annual increase was 2.9%. Data released yesterday showed consumer inflation also unexpectedly increased in July and rose expectations that Bank of England would feel comfortable resuming its rate hiking cycle.