Gold Shines In The Global Market Over Weak Global Economic Conditions; Silver Loses Charm

Gold further inched up further, with COMEX gold futures rising from the level of $1298.50 (Day’s low on 9th April 2019) to the present level of $1309. The gold reversed from a downturn after hitting the level of approx. $1279.50 (Day’s low on 4th April 2019). The factor which contributed to the gold upsurge majorly revolves around the concern of global economic conditions.

Gold prices plunged previously towards the respective low of $1279.50 amid betterment in manufacturing activities in the United States and China. Along with the rise in manufacturing activities, which soared up in both the significant economies, steady job market situation in the United States also exerted the pressure on gold prices.

However, in the recent scenario, the job creation in the United States marked a declining trend of average hourly earnings (noted as 0.1% for the month of March as compared to market expectation of 0.3% and previous month’s 0.4%), which raised the eyebrows of market participants over the quality of improvement in the U.S. economy; thereby exerting pressure on dollar prices and supported the gains in gold.

Dollar Index (DXY) dropped from the recent high level of 97.52 (Day’s high on 2nd April) to the level of 97.08 (Day’s low on 9th April). The Dollar Index adjusted quickly over the poor quality of jobs in the United States economy and provided a cushion to gold prices, which in turn, boomeranged from the level of $1279.50.

Apart from the questionable quality of jobs, the recent demand from the United States president, Donald Trump, to slash the current interest rate from the Federal Reserve also supported the gold prices. The FED made it clear in the past meetings that the prevailing economic conditions cannot take any interest rate change, which in turn, led the FED to hold the interest rate unchanged.

The recent demand of the U.S. President is expected by the market participants to be in line with the deteriorating economy, and this expectation led the gold prices to inched up further in the international market.

Apart from the U.S. actions, another factor which supported the gold prices was the recent International Monetary Fund (IMF) downgrading of its global economic outlook. The IMF kept the growth forecast at the lowest levels since 2009. IMF slashed its forecast for the global economic growth for the third time in a row, which in turn, raised suspicion in the global market and supported gold prices.

IMF slashing impacted global equity markets and raised concerns among the market participants about their investment in the equity segments and generated fear of diminishing returns from other assets classes as well. The panic led the market participants to hedge their investment against the uncertainty, which can be provided by precious metals, which in turn, supported the gold prices.

In light of rising gold prices, major gold stocks closed in green today. Dacian Gold Limited (ASX: DCN) soared by 3.07%, closing the day at A$2.350. Kirkland Lake Gold Limited (ASX:KLA) zoomed up by 6.5%, settling at A$48.490 by the close of market trading on 10 April 2019.

However, silver prices plunged on COMEX from the level of $15.310 (Day’s high on 9th April) to the present level of $15.152. The fall in silver was majorly accounted for its industrial applications, as slowdown concerns, exerts pressure on industrial metal prices. The Gold-Silver (XAU/XAG) ratio rose over the twin action of rising gold prices and fall in silver prices. The ratio climbed to the present level of 85.91 over the losing leverage of silver to the gold prices.


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