As dollar weakens on Monday due to US President Donald Trump mentioning about the need of interest rate cut and US employment data released on Friday showing weak wage growth despite increasing employment, gold starts the week edging up. It is announced that trade talks will continue via teleconference this week after talks in Washington last week while Chinese official CCTV broadcaster reported there are “new progress” in talks and sides are working on a draft agreement that includes important issues. In the meantime, Fed’s March meeting minutes, which will be published on Wednesday, is expected to give more details on followed monetary policy while European Central Bank officials will be meeting on Wednesday.
While dollar index decreased on Monday after it weighed on yellow metal following strong US employment data on Friday, gold prices increased today.
As of 14:43 GMT+3, gold was trading at $1,297.65 an ounce while dollar index was down to 97.20. US 10-year Treasury yield was at 2.501.
Better than expected US employment data in March, following weak data in February, eased worries and pointed out a strong US economy however, weak wage growth shows already-low inflation to remain below Fed’s 2% target.
CIBC Capital Markets senior economist Katherine Judge said the surprising thing in employment report was weak growth of wages while adding it could be signaling that labor market would start weakening later this year. Judge said, it might not be a sharp slowdown as expected and added this weakening would not force Federal Reserve to follow expansionary policy.
In the meantime, while it was announced that trade talks would continue this week via teleconference, following the trade talks in Washington last week, Chinese official CCTV broadcaster reported that there was new progress in talks and two sides were working on a drafted agreement that included important issues such as technology transfer, protection of intellectual property rights, trade imbalances and ways to implement the trade deal. White House economic advisor Larry Kudlow said, the US and China were “closer and closer” to a deal while US President Donald Trump said earlier that a deal could be reached in four weeks.
Fed’s March meeting minutes will be published on Wednesday. While it is expected to find more details on followed monetary policy, Deutsche Bank Securities chief economist Peter Hooper said on Bloomberg that if inflation were to go lower, then Fed would likely cut the rates. President Trump also commented on this issue and and said on Friday that the US economy was in good place but added Fed slowed down the economy as he pointed out the need for rate cut.
European Central Bank (ECB) officials will be meeting on Wednesday. ECB is expected to keep its stance as it kept interest rates on hold and wiped out expectations for a rate hike this year in its last meeting, while details on the long term refinancing program will likely be announced no earlier than June. As Eurozone economy has quickly slowed down recently, ECB officials’ comments on both domestic and foreign demand will be under spotlight.