After finding support from escalating trade tensions between the US and China, gold prices kept its upside movement on Wednesday as recession worries increased due to deepening inversion between short and long term US yield curves and then fell slightly due to stronger dollar and profit taking however these movements are seen as consolidation at these levels. Alongside with 3-month vs. 10-year yield curves, which inverted in March for the first time since the global crisis, inversion between 2-year vs. 10-year yield curves is seen as an indicator of a recession which caused investors to flee from volatile global markets and rush into safe havens and this supported gold prices. On geopolitical side, UK Prime Minister Boris Johnson set a new date for parliamentary opening which is seen as British coup by the opponents since it limits their time to react and that increased worries on disorderly Brexit.
As gold prices are up this week due to escalating trade dispute between the US and China, yellow metal reached $1,546 an ounce on Wednesday amid worries on global economic recession.
As of 22:06 GMT+3, spot gold was trading at $1,542.41 an ounce while dollar index was up to 98.21. US 10-year Treasury yield weakened further to 1.468.
RJO Futures senior market strategist Bob Haberkorn said on Reuters that decrease in prices would not likely last longer as traders were trying to buy dips in gold and added upside movement could be quick considering yield curves and Fed’s current approach.
As the global economy continues to slow down amid ongoing trade tensions between the US and China, recession worries increased as inversion between short and long term US yields deepened. While inversion between 3-month vs. 10-year yield curves, which inverted in March for the first time since the global recession, deepened as low as 52 basis point, difference between 2vs10-year yields continued to remain in negative territory, which is accepted as an indicator of an upcoming recession.
On geopolitical side, UK Prime Minister Boris Johnson caused concerns regarding no-deal Brexit by setting a new date for parliamentary opening in mid-October because House of Commons will be suspended between mid-September and mid-October which will allow limited time for opponents to react and stop disorderly Brexit. On the other hand, there is a possibility for Boris Johnson to face a vote of no confidence. Brexit, either orderly or disorderly, is expected to happen on October 31.