Gold prices keep steady on Tuesday after increasing on Monday due to increasing worries on global growth and rising geopolitical tensions. Data released yesterday showed deterioration in Eurozone economy continued to deepen, especially in Germany, while Germany’s central bank Bundesbank said in a recent report that the economy started the Q3 on the back foot and there could be another contraction. Another report by Ifo institute said business climate index slightly recovered in September however this was a breather considering deteriorating outlook in the coming months. In the meantime in Japan, where the economy has been hit hard by trade war and slowing global economy, data released today showed contraction in manufacturing sector continued for the fifth consecutive month in September with further deterioration.
As investors wait for developments on trade front, gold prices trade in a narrow range on Tuesday after finding support from geopolitical tensions in the Middle East alongside with rising global growth worries due to recently released weak economic indicators all around the world.
As of 15:55 GMT+3, spot gold was trading at $1,522.66 an ounce while dollar index was at 98.58. US 10-year Treasury yield was down to 1.690.
AxiTrader strategist Stephen Innes said on Reuters that if economic conditions were to deteriorate further, this would be supportive for gold since the markets would expect more stimulus from Fed which would lower bond yields.
Data released yesterday showed economic conditions in Eurozone, especially in Germany, deteriorated further and Bundesbank, Germany’s central bank, said in a recent monthly report that German economy started the Q3 on the back foot due to export-oriented industry and the economy could contract again. The report said labor market continued to remain strong and supported private consumption while stating that construction sector flourished however added that it was uncertain whether the cyclical upturn could be enough to reverse current downturn in manufacturing sector. Report also stated that trade and geopolitical tensions continued to pose risks to German industry while underlining that contraction in two consecutive quarters would not be a reason to worry and this should be seen as a cyclical return to normality after overheating of German economy.
In another report by Ifo institute, it was stated that business climate index in Germany slightly recovered in September and increased to 94.6 from 94.3 however underlined that it was a breather given deteriorating economic outlook in the coming months. According to the report, conditions in manufacturing sector continued to deteriorate with pessimistic outlook while services sector slightly recovered and construction sector remained on positive path. The report also stated trade expectations in the coming months deteriorated.
In the meantime in Japan, where the economy has been hit by trade war and global economic slowdown, data released today showed contraction in manufacturing sector continued for the fifth month in September. According to the data, manufacturing PMI declined to 48.9 from 49.3 while new factory orders declined for the ninth month in a row. IHS Markit’s report said US-China trade dispute, Hong Kong protests, Brexit and diplomatic dispute between Japan and South Korea weighed on manufacturing sector. On the other hand, services PMO declined to 52.8 from 53.3 however remained in expansion territory while composite PMI fell to 51.5 from 51.9.