Is Gold Bucking The Trend Or Event Related Impact Is Looming Over The Price Movement?

Is Gold Bucking The Trend Or Event Related Impact Is Looming Over The Price Movement?

Lately, gold spot prices were seen to undergo a jolt and then the same touched a level of $1302.81 but soon reversed from the bottom to reach around $1310 amid growing uncertainties over US-China trade war. The comment on media by Lawrence Kudlow expressed peril over US-China 90 days Peace period. Comment from the White House advisor came late on Thursday evening, wherein a considerable gap was highlighted in the U.S. -China trade talks which in turn supported the gold prices.

The U.S. Unemployment data also supported the gold prices, as employment benefits were seen to be dropping from the high levels noted over a year and a half ago. The trend in filling of unemployment claims hinted towards the slow-pace of the U.S. economy and in turn, exerted the pressure on dollar index and supported the safe haven prices. However, the gain from the data was capped the price around $1310 as the Unemployment Claims’ figure was in line with the market expectation of about 220K and the market was quick to react in view of the falling dollar. The support in dollar prices, thus capped the gain on gold prices. Additional factor impacting the scenario came from the U.S president, Donald Trump when he said on Thursday evening that he did not intend to meet Chinese president Xi Jinping. The statement is further believed to escalate the trade tensions between the two major economies and have a potential for another U.S. government shutdown.

Apart from the dark clouds hovering around the U.S. – China trade war, factors such as Brexit and worries of global economic slowdown are further supporting the gold prices. Recently, the European commission drastically cut its euro-zone economic growth forecast to 1.3% from previous projection of 1.9%; and 1.6% from 1.7% for present and next year amid global trade tension and domestic worries. The German industrial output has also fallen, and this is pointing to a strong slowdown signal in Euro-Zone. During the time of economic slowdown and chaos, investors and market participants look for a safe option, which is usually provided by gold. The further fall of in US-10-year yield to maturity is supporting the gold prices. The European government bonds rallied as well, decreasing the yield-to-maturity. Overall, the combination of U.S. – China trade war along with the perspective of a slowdown in global economic growth, growing fears of a wider sink in Europe and decrease in yield-to-maturity in fixed income market is supporting the gold prices and keeping it above $1300 level.

On the other side, the recent cut by Reserve Bank of Australia (RBA) in its yearly gross domestic product (GDP) forecast exerted the pressure on Australian dollar (AUD) and supported the USD relatively which in turn capped any significant gain in gold prices.

Given this hustle bustle, the market participants should keep an eye on the recent and upcoming developments in the bullion market to further reckon the direction of gold prices.


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