Recovering from more than 2-month low yesterday due to weak manufacturing data in the US, gold prices continued to increase on Wednesday after some investors took profit early in the session. While focus is now on US non-farm payrolls due on Friday, gold holds tight as a safe haven asset due to increasing global growth worries. The IMF’s First Deputy Managing Director David Lipton said yesterday that the IMF expected more significant global slowdown than three months ago and it could be difficult to see economic recovery if trade uncertainty remained unsolved.
As dollar weakened after recent data indicated that manufacturing sector in the US showed the worst performance since the global crisis, gold prices continued to increase on Wednesday by finding support from weak economic data and global growth worries.
As of 15:45 GMT+3, spot gold was trading at $1,488.59 an ounce while dollar index at 99.24 US 10-year Treasury yield was down to 1.627.
AxiTrader market strategist Stephen Innes said on Reuters that the markets did not want to rush as there was possibility for a surprise in US non-farm data due on Friday while adding that investors needed convincing to return back to gold.
As worries on global economic slowdown increased due to weak manufacturing data all around the world, the IMF’s First Deputy Managing Director David Lipton said in his speech yesterday that the IMF expected more significant slowdown in the global economy than three months ago and added that it would be difficult to see economic recovery if trade dispute remained unsolved. Lipton stated there was gradual slowdown in the global economy and the data had got worse since July, when the IMF released its latest forecast, while underlining the importance of fiscal policy alongside with monetary policy in case of a further slowdown. IMF’s new economic forecasts will be released this month.
In the meantime, in Germany, where recent data indicated deepening contraction in manufacturing sector, five leading economic research institutions said in a report released on Wednesday that they downgraded growth forecast for Germany. Report said global economic slowdown and trade war weighed on German manufacturers and downgraded 2019 growth to 0.5% from 0.8% and 2020 growth to 1.1% from 1.8%. As weaker demand for capital goods led to falling production since the middle of the year, report stated capacity utilization was still above long-term average and it was early to talk about an economic crisis. However, report also said Germany economy likely contracted in the Q3 which would mean technical recession after the contraction in the Q2.