Gold prices closed the week at $1,277 after hitting the lowest level of the year on Thursday, following strong data from the US and China and saw another weekly loss despite finding support from weak European manufacturing data released yesterday. While better than expected retail sales in March and 50-year low unemployment benefits applications in the US indicate that the US economy remains strong, weak European manufacturing data released yesterday is taken as a proof that the Eurozone may have seen low growth in the first quarter. In the meantime, core inflation edges higher in Japan, however inflation far from central bank’s 2% target increases concerns over the health of the economy.
While growth concerns eased due to US data showing above expectations retail sales in March and 50-year low unemployment benefits applications as well as Chinese data showing better than expected first quarter growth and increasing industrial production, gold prices increased on Thursday by finding support from weak European manufacturing data, yet saw weekly loss. Markets are closed on Friday for Good Friday holiday.
Spot gold closed the week at $1,277.06 while dollar index was down to 97.35 as of 15:34 GMT+3. US 10-year Treasury yield was at 2.560.
According to data released on Thursday, US retail sales increased by 1.6% in March, highest since September 2017, while applications for unemployment benefits hit the lowest in 50 years at 192,000. As manufacturing PMI did not change at 52.4 in April, services PMI fell to 52.8 from 55.3.
In Europe, it was seen that manufacturing remained weak and could not recover from its low levels in contraction area. Eurozone manufacturing PMI increased to 48.8 from 47.5 in April while services PMI fell to 52.5 from 53.3. It is obvious that weakness in data was driven down by the manufacturing data in Germany and Italy because Germany’s and France’s manufacturing PMI was at 44.5 and 49.6 respectively and remained in contraction area while services PMI increased to 55.6 in Germany and to 50.5 in France.
While reading below 50 indicates contraction, reading above 50 shows increase in economic activity.
In the meantime, according to data released on Friday, Japan’s core inflation edged up to 0.8% in March however weakness in inflation increased concerns over the health of Japanese economy since inflation is still well below central bank’s 2% target. Mitsubishi UFJ Morgan Stanley Securities senior economist Hiroshi Miyazaki said on Reuters that there was not enough momentum to reach 2% target since wage growth was not high enough to support it. Due to low inflation, it is stated that it is not easy for Bank of Japan to start tightening its monetary policy and that BoJ does not have enough ammunition to respond to a serious economic downturn.