After falling on Monday due to increasing risk sentiment following US data released yesterday showing that US consumer spending rose the highest in almost 10 years in March, gold prices recovered on Tuesday following weak Chinese manufacturing data. According to data released in China today, manufacturing and non-manufacturing PMI decreased in April which increased worries over the health of Chinese economy and moreover, there are concerns of how much more stimulus Chinese government can generate to support sustainable economic growth without causing rapid increase in debt. In the meantime, Eurozone economic activity seems to recover slightly from recent weakness, according to data released in bloc’s major economies.
Gold prices recovered following rising growth concerns due to weak Chinese manufacturing data released on Tuesday, after yellow metal started the week falling below $1,280 following US consumer spending increased the highest in almost 10 years in March.
As of 14:57 GMT+3, spot gold was trading at $1,285.81 while dollar index was down to 97.53. US 10-year Treasury yield was also down to 2.529.
Kotak Securities analyst Mahdavi Mehta said on Bloomberg that gold prices increased due to the Chinese data causing volatility in Asian markets and debates on whether stimulus program would continue to support economic activity while adding Fed might not be as dovish as expected after two-day meeting starting today because of strong US data and this could limit yellow metal’s upside movement.
According to data released today in China, manufacturing PMI fell to 50.1 from 50.5 in April. Although manufacturing expanded for the second month in a row, worse than expected manufacturing despite all the stimulus measures taken by the government caused concerns whether the economy would show solid recovery. While economists stated that Chinese economy started the second quarter on the back foot and underlined downside risks in the short term, the economy is not expected to recover anytime before the second half of the year. On the other hand, non-manufacturing PMI fell to 54.3 from 54.8 in April. Besides, while there are discussions on how much more stimulus China could generate to support sustainable growth, it is stated to be obvious that Chinese growth is supported by economic stimulus which is why the economy is not expected to recover quickly as it happened before.
In the meantime, Eurozone economy seems to slightly recover from recent weakness, according to data released today in bloc’s major economies. France grew by 0.3% in the first quarter while consumer inflation was 0.2% monthly and 1.2% annually in April. Spanish growth was above expectations at 0.7% in the first quarter and consumer inflation was 1% monthly and 1.5% annually in April. Unemployment rate did not change in Germany at 4.9% in April while consumer inflation in Italy was 0.2% monthly and 1.1% annually in April. Besides, Eurozone grew above expectations in the first quarter at 0.4% while yearly growth increased to 1.2%.