Gold prices edged up with investors buying the dips after yellow metal fell sharply as political tensions, which increased due to official impeachment process against US President Donald Trump, calmed down after the release of phone call transcript. Besides, President Trump stating that trade agreement could happen sooner than thought increased trade optimism while stronger dollar limited upside movement in gold prices. The New York Fed continued its repo operations and announced that it would increase overnight repos to $100 billion on Thursday. In the meantime, ECB’s recent monthly report said weakness in Eurozone continued with downside risks and low inflation pressure while stating strong employment and wage growth continued to support resilience of bloc’s economy. Besides, a survey in Germany stated that consumer sentiment is expected to inch up after ECB’s recent monetary stimulus package.
Gold prices increased sharply by focusing news related to impeachment process in the US and then fell sharply in the previous session as worries on political tensions faded. However, it maintained its position above $1,500 an ounce with investors buying the dips even though stronger US dollar capped the gains.
As of 13:18 GMT+3, spot gold was trading at $1,504.10 an ounce while dollar index was up to 99.01. US 10-year Treasury yield was down to 1.699.
IG Markets analyst Kyle Rodda said on Reuters that gold pulled back as there was some ambiguity regarding impeachment process of the president and added sentiment for yellow metal declined due to trade optimism.
Political tensions which increased after Democrats started an official impeachment process against the US President Donald Trump calmed down as investors shrugged off the release of the transcript of the call between President Trump and Ukraine President Volodymyr Zelenskiy. Besides, risk sentiment increased after President Trump said yesterday that a trade deal with China “could happen sooner than you think.”
Intervening the market last week due to rising repo rates, The New York Fed keeps on with its repo operations. The NY Fed announced that it would increase overnight repos to $100 billion from $75 billion on Thursday and 14-day repos to $60 billion instead of $30 billion. Whether this will go on the following days is uncertain however considering the lack of liquidity in short-term funding market, the Fed is expected to continue its repo operations and even increase the amount.
In the meantime, European Central Bank said in its monthly report that weakness in Eurozone economy persisted with downside risks and low inflation pressure while stating strong employment and wage growth supported bloc’s economy’s resilience. Underlining weak investment and political uncertainties due to Brexit and US-China trade war, ECB said global growth would decline this year and these uncertainties pressured manufacturing in bloc’s economy. ECB also said services and construction sectors continued to perform well and Eurozone’s economy remained supported by favorable financial conditions, expansionary fiscal stance and growing, although slower, global activity.
In a survey by market research group GfK in Germany, consumer confidence is expected to increase in October following ECB’s recent monetary stimulus package. According to the report, consumer confidence increased to 9.9 from 9.7 however this would depend on possible developments in labor market in the coming months. With contraction in manufacturing having an impact on labor market, less hiring and more laying offs, it is expected to weigh on consumer sentiment eventually.