After falling to as low as $1,484 an ounce in the previous session, gold recovered slightly on Wednesday with investors buying from dips while all attention shifts on European Central Bank’s monetary policy meeting tomorrow. ECB is expected to cut the rates while it is claimed that the bank would also compensate banks for the pain caused by long-lasting negative interest rates. In Japan, where the economy has been hit hard by global economic slowdown alongside with US-China trade war, Bank of Japan is reported considering more monetary stimulus in case of a sharper economic downturn. In the meantime, risk sentiment increased as it was claimed that China was considering several measures to lower the costs of trade war amid reviving negotiations. Moreover, China announced list of goods that would be exempt from its tariffs on US products.
Gold prices inched up on Wednesday with investors buying dips however remained below $1,500 an ounce after yellow metal hit one month low in the previous session due to higher risk sentiment.
As of 14:23 GMT+3, spot gold was trading at $1,492.64 an ounce while dollar index was up to 98.55. US 10-year Treasury yield rose further to 1.713.
DailyFX commodity analyst Ilya Spivak said on Reuters that market participants were reluctant to take big risk which would nudge gold upwards ahead of ECB meeting. Spivak also said gold remained supported as main sources of risk aversion like Brexit, US-China trade war and slowdown in global economy remained unsolved.
European Central Bank is highly expected that it will cut the rates in its monetary policy meeting tomorrow while it was claimed that the bank would also compensate banks for the pain caused by long-lasting negative interest rates.
In Japan, where the economy has been hit hard by global economic slowdown and US-China trade war, Bank of Japan will likely consider easing its monetary policy further this month. As policymakers’ confidence regarding expected recovery in Japanese economy fades with weakening global demand, global economic recovery taking longer than expected keeps posing risks to Japan’s growth and domestic demand. BoJ announced earlier that it could ease its monetary policy by using four tools including deepening negative interest rates, cutting 10-year yield target, buying more risky assets and printing more money but it is still uncertain which one of these will be used. Besides, the central bank will need to compensate the pressure that will weigh on financial institutions in case of further monetary easing. BoJ’s next monetary policy meeting will be held on September 18-19.
In the meantime, Global Times chief editor Hu Xijin said today that China was considering to take several measures to lower the costs of trade war with the US, which increased risk sentiment in the markets. Hu did not say what measures those would be but added it would be beneficial for both Chinese and US companies.
Besides, China Finance Ministry published a list of goods that would be exempt from its tariffs imposed on US products. The list includes 16 different type of products and the ministry said it would work on more products to be exempt from tariffs. However, this is not considered significant amount of goods considering huge amount of imports from the US, including soybean and corn among the most. Statement also said that exemption would take place as of September 17 and last one year until September 16, 2020.