Gold prices retreated from its three-week high reached recently as dollar index inched up on better-than-expected U.S. data released yesterday, however gold holds firm on Friday, on its way to third weekly gain in a row. U.S. President Donald Trump kept criticising Fed despite its dovish stance and said U.S. economic growth would have been above 4% if it was not for Fed’s decisions. By the way, S&P Asia-Pacific economist Shaun Roache thinks Fed is not done with interest rate hikes and there will likely be an increase in interest rates this year or early next year. On geopolitical side, it’s been announced that the UK and the EU reached a conditional agreement on extension of Article 50.
According to U.S. data released yesterday, applications for unemployment benefits fell more than expected which showed labor market was still holding firm despite economic slowdown while Philadelphia manufacturing index rose sharply in March after recovering from 2-1/2 year low. However there is still weakness in manufacturer’s sentiment and capital investment expectations. Thus, gold prices were pressured by rising dollar index yesterday, however on Friday, gold holds firm while on its way to third straight weekly gain.
As of 12:24 GMT+3, spot gold was trading at $1,311.84 an ounce while dollar index rose to 96.79. U.S. 10-year Treasury yield was lower to 2.499.
U.S. President Donald Trump keeps criticising Fed despite its dovish stance. U.S. would have had above 4% growth if it was not for rising interest rates and balance sheet reduction, Trump said in an interview on Thursday. He said he did not know if he affected Fed’s decision however added he was right about his criticism on interest rate changes and balance sheet reduction. U.S. growth was 2.9% in 2018 and 3.1% in the fourth quarter year-on-year basis.
In the meantime, S&P Asia-Pacific economist Shaun Roache said on CNBC that Fed was not done with interest rate hikes yet. Roache said, given global economic conditions, Fed’s stance to wait and see how things would evolve before deciding any further interest rate hike would make sense while adding he found concerns on global slowdown a little bit overdone. He said they expected growth to be above 2% and labor market to hold firm while underlined, Fed would consider increasing interest rates this year or early next year due to decreasing unemployment rate and increasing wages.
On Brexit side, it was announced that the EU and the UK reached an agreement on extension of departure date. According to formal communique, EU will extend Article 50 to 22nd of May if British Prime Minister Theresa May’s deal is approved by British parliament next week, otherwise, in case of third rejection, departure date will be extended to 12nd of April. It was also stated that the UK would need to present clear strategy to the EU in case of Brexit deal being rejected again while underlining there would be no renegotiation. EU leaders think the risk of having the UK as a member state beyond stated date is too high since European elections are due to start on 23rd of May. Theresa May was seeking an extension of Article 50 to 30th of June.