While dollar index rose on Thursday, gold prices declined even though it was still trading in a range. Weakness in the U.S. note yields remain due to global growth worries while Chinese industrial firms’ profit declined the most since the global recession, according to data released on Wednesday. Kansas Fed President Esther George said the biggest risk is coming from slowing growth abroad over the medium term, especially from China, Eurozone and the UK and added it is appropriate for the U.S. central bank to keep its wait-and-see approach. In the meantime in the UK, none of the notions voted yesterday could gain support from MPs and Prime Minister Theresa May said she would quit in case of Brexit deal being approved by the parliament.
While strengthening dollar weighs on gold prices on Thursday, gold keeps trading in a narrow range. According to some analysts, U.S. notes met most of the safe haven demand but gold is expected to rise as global economic slowdown worries increase further in upcoming months.
As of 15:23 GMT+3, gold was trading at $1,303.04 an ounce while dollar index rose to 97.11. U.S. 10-year Treasury yield was at 2.374, hovering around 15-month low due to global slowdown and recession worries in the U.S.
Data released in China on Wednesday showed industrial firms’ profit decreased the most since the global recession and it was taken as a reflection of slowing economy in the world’s second biggest economy. Profits in January-February declined by 14%, which was the lowest since 2009 however profits are expected to recover and rise in the second quarter of the year due Chinese government’s fiscal expansionary policies to stimulate economy.
In the meantime, Kansas Fed President Esther George said U.S. economy was facing notable risks while added Federal Reserve’s wait-and-see approach was appropriate. “The biggest risks are coming from slowing growth abroad,” George said, and added China, the Eurozone and the UK was posing risks to the U.S. economy the most. She also said the U.S. economy was in good shape and weakness in job growth would likely recover while added she expected growth to slow down to trend with moderating inflation.
In the UK, none of the 8 notions including second referendum and cancelling Brexit voted on Wednesday could not gain support from the British parliament. Moreover, British Prime Minister Theresa May said she would quit in case of having her Brexit deal approved by the parliament. After this, May gained some support from opposition and her MPs but she still needs significant support from Northern Ireland’s Democratic Union Party which announced they would not support Brexit deal due to risks of conflicting Irish backstop clause. By the way, House of Commons speaker John Bercow reiterated that twice-rejected deal could not be brought to the parliament for a third vote without having made significant changes even if the deal seemed like gaining support from the MPs this time. If the deal is voted for the third time and approved by the parliament, departure date will be postponed to 22 May 2019, otherwise departure will be on 12 April 2019. However, if British government requests, longer extension option will still likely be on the table.