Gold ticks up this morning, as bulls push through any signs of lessening risk aversion. The yellow metal also getting support from the weak economic data from both the U.S. and China that is heightening speculation of monetary easing from central banks around the world.
China’s exports unexpectedly contracted in August, with sales to the U.S. tumbling amid the escalating trade war between the two nations, Bloomberg reported. Exports decreased 1% in dollar terms from a year earlier, while imports declined 5.6%, leaving a trade surplus of $34.84 billion, according to data Sunday from the customs administration. Economists had forecast that exports would grow 2.2%, while imports would shrink by 6.4%.
On Friday, the People’s Bank of China said it will cut the amount of cash banks must hold as reserves to the lowest level since 2007, injecting liquidity into the economy.
Last week, the monthly U.S. employment report for August showed job growth slowed more than expected, boosting expectations that the Federal Reserve will cut rates at its meeting next week. Fed Chairman Jerome Powell said Friday that the report was consistent with a strong labor market and said that it didn’t foresee a U.S. recession despite some trade uncertainties.
This morning, the CME FedWatch Tool put the probability of a Fed interest-rate cut on Sept. 18 at 93.5%, with the same percentage predicting a 25-basis-point reduction. That’s up from 90% on Friday. The odds of no cut were put at 6.5%.
The European Central bank is widely expected to cut rates on Thursday.
Adding to global uncertainty, police in Hong Kong fired tear gas on protesters on Sunday. And U.K. Prime Minister Boris Johnson has stuck to a plan to pull the country out of the European Union by the end of next month despite a series of defections from his Conservative Party. U.K. gross domestic product numbers are scheduled to come out Monday and may shed some light on how the Brexit battle is affecting the economy.
Precious metals lost ground last week after climbing in August amid uncertainty over the U.S.-China trade war, fears of an economic recession, speculation of upcoming interest-rate cuts and negative bond yields. The most-active December gold contract fell 0.9% last week to $1,515.50 an ounce on Comex. On Thursday, it posted its biggest one-day drop in dollar terms in almost three years. This morning, the December contract is up to $1,520.70.
Hedge funds and money managers increased their bullish positions in Comex gold and silver contracts in the week ended Sept. 3, U.S. Commodity Futures Trading Commission data showed Friday, according to Reuters.
Silver’s decline outpaced gold’s last week, with the December contract plummeting 1.2% to $18.12 an ounce on Comex. This morning, the Silver December contract is up a bit to $18.215. Spot platinum and spot palladium both advanced last week and are in positive territory this morning.
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