Gold Prices Rise Amid Global Growth Concerns

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Gold prices rise on Friday as dollar index remains weak below 97 level. Global growth concerns increased after Chinese Premier Li Keqiang’s speech at the end of National People’s Congress while gold is on its way to second weekly gain with increasing demand to safe havens. Chinese economy is facing downward pressure, Li Keqiang said, and added China is facing economic slowdown when global economy is also under pressure. In the meantime, Bank of Japan kept its interest rates on hold and added there is weakness in output and export due to slowdown in global economy. By the way, U.S. Treasury Secretary Steven Mnuchin said there will be no summit between two leaders while U.S. President Donald Trump said progress in trade talks will likely be clarified in three or four weeks.

Gold bullion by line graph

Gold prices increased above $1.300 again as yellow metal was supported by weakening dollar.on Friday. Besides, global growth concerns increased safe haven demand and gold is on its way to second weekly gain.

As of 14:54 GMT+3, spot gold was trading at $1,304.15 as dollar index was lower at 96.64. U.S. 10-year Treasury yield little changed at 2.623.

This is true that China’s economy has encountered new downside pressure and slowdown in Chinese economy comes when global economy is also under pressure, said Chinese Premier Li Keqiang in his speech at the end of National People’s Congress on Friday. Keqiang said, China will stick to its current economic policy and underlined they will resist the temptation of large-scale stimulus like quantitative easing and massive fiscal expansion while stating “indiscriminate approach” may help in the short-term but will be harmful for Chinese economy in the long run. Speaking of yesterday’s data showing unemployment has increased to 5.3%, priority is to prevent job losses during this slowdown, Keqiang said. He also said tax cut will take effect on 1st of April while social security reductions will take effect on 1st of May.

In the meanwhile, Bank of Japan (BoJ) kept its interest rates on hold at 0.1% while stated weakness in industrial output and export would hurt growth. Risks caused by overseas economies will threaten fragile economic recovery, said BoJ. It is claimed major concern of BoJ is that the weakness in output and export will be hurting company investments and slowing down wage growth as it will keep low inflation under pressure. BoJ will be forced to ease its policy as Japanese economy will start showing signs of slowdown in the middle of next year, said BNP Paribas Securities senior economist Hiroshi Shiraishi. Adding to this, it may be discussed that weakness in the economy is temporary but “this is becoming increasingly closer call,” Sumitomo Mitsui Asset Management Chief Macro Stratejist Masayuki Kichikawa said, warning that next three months will be critical.

On trade talks, which is still not clear how it will to come to an end, there is still a lot of work to do but we are happy with where we are, U.S. Treasury Secretary Steven Mnuchin said, adding that two sides are working hard to reach a trade deal soon. Mnuchin also confirmed there wouldn’t be a summit between two leaders in March. On the other hand, U.S. President Donald Trump said trade talks were going really well and progress would be clarified in three or four weeks. He also reiterated his view on possible trade deal that there won’t be any deal unless it is a good deal for the U.S.