After closing last week with weekly loss due to stronger dollar, gold prices weakened further on Monday amid calming trade tensions. After Reuters reported that Trump administration was considering de-listing Chinese companies from US stock markets, Bloomberg reporting that there was no such plan, referring officials from US Treasury Department, calmed trade tensions while Chinese side announced that it would open more sectors to foreign investors. On economic data side, data released today showed industrial production in Japan contracted more than expected in August, which was another sign that global economic slowdown weighed on the sector while retail sales increased in the same month due to higher private spending. In China, Caixin manufacturing PMI was above expectations in September, which was due to reviving domestic demand.
As dollar index holds tight above 99 and pressures yellow metal, gold prices continued to weaken further due to considerably positive developments on trade front ahead of high level trade talks.
As of 15:45 GMT+3, spot gold was trading at $1,484.46 an ounce while dollar index was at 99.44. US 10-year Treasury yield edged up to 1.685.
AxiTrader market strategist Stephen Innes said on Reuters that there was some confusion due to contradicting news on trade front and in these situations, investors would flee from equities and invest bonds which would strengthen dollar and that would weigh on gold.
Reuters reported on Friday that Trump administration was considering de-listing Chinese companies from US stock markets but then Bloomberg reported, referring to Treasury officials, the administration has no such plan yet, which caused confusion among investors. It was stated that the move was a part of a bigger plan to limit US investments to Chinese companies however tensions calmed on trade front for now. In the meantime, Wang Shouwen, China Vice Minister at Commerce Department, said China hoped trade disputes to be solved with calm and rational manner while adding China would open more sectors to foreign investors.
On economic data side, in Japan, where the economy has been hit hard by global economic slowdown and trade war, industrial production declined more than expected in August. According to the data, industrial production fell 1.2%, indicating the sector was under ongoing pressure by slowing global economy while the weakness is expected to persist and even deepen with weakening exports alongside with planned sales tax increase in October. Separate data showed retail sales increased 2% in the same month due to reviving domestic demand ahead of tax increase.
In China, manufacturing PMI was above expectations in September due to reviving domestic demand. According to the data, Caixin manufacturing PMI was up to 51.4 from 50.4 while reviving domestic activity with total new orders increasing despite falling new export orders might offset weakness caused by trade war. However, the economic growth could break below 6%, lower end of growth target, as weakness in employment and industrial profits persists.