Gold prices soared amid poor industrial production in the United States. The COMEX gold future recovered from the level of $1272.20 (Day’s low on 16th April 2019) to the present level of $1278.65. The factor which supported the gold prices is the doubts among market participants regarding the United States’ economic conditions. Previously gold prices took a hit over improving global economic conditions and progressive trade-talks between U.S-China.
However, the progressive trade talks seem to be providing higher benefits to the Chinese economy as compared to the economic conditions of the United States, which in turn, prompting currency market to short-sell dollar. A lower dollar supports the gold prices as gold is a dollar-denominated asset and a rise in dollar makes it hard for investors of other countries to hold the asset amid exchange rate risk.
As per the data, the United States industrial production declined in the first three months of the year 2019. After rising by 0.1% on a monthly basis previously for February 2019, the industrial production declined by 0.1% in March 2019. This raised optimism among bullion investors that the U.S. economy might not be in a shape, also predicted by market participants earlier, which in turn, supported the gold prices.
Albeit, the industrial production improved on a monthly basis as compared to the decline of 0.6% in January 2019, but, the improving China’s economic figures suggest that China is taking upper-hand from the trade talks, which in turn prompted currency investors to shun their bet on dollar prices, which further supported the gold prices in the international market.
As per the data, the Chinese industrial production surged by 8.5% in March 2019, as compared to just 5.3% in January 2019 and against the market expectation of 5.6%. The quarterly GDP of China improved by 6.4%, against the market expectation of 6.3%.
An improvement in Chinese figures signifies that China is out-weighting the weight balance in the trade talks and cashing in the opportunity to improve the domestic economic conditions, which in turn, exerted pressure on dollar prices.
Dollar Index (DXY) plunged from the level of 97.19 (Day’s high on 11th April 2019) to the present level of 96.89, the fall in dollar prices propelled the safe-haven demand, which in turn, supported the gold prices.
However, the United States Federal Reserve unclear stance on the movement of the future of interest rate is creating dilemma among market participants and preventing a sudden rise in gold prices.
To gauge the direction of gold prices further, the market participants are eyeing on the global economic conditions, along with the Federal Reserve stance on the future of interest rate, which is time-to-time signalled by FED members to be unchanged till the global economic conditions revive.
The prevailing economic conditions in the global market is suggesting that the interest rate will be on-hold for some time, which in turn is providing a boost to the bullion investors and supporting the gold prices.
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