Poor Chinese data sends Gold to 14-month high
|After a strong run higher last week, this time out its been far more steady for equities, with most major stock markets trading not far from where they ended last Friday. Having said that, some news out this morning has threatened to cause some weakness into the weekend with a batch of data from the far east coming in worse than expected.
Chinese industrial production in particular was soft, with a year-on-year increase of 5% marking the lowest reading for this metric in 17 years and further supporting the notion of a slowing global economy. The release has caused European stock markets to fall lower while US futures also trade in the red in a small (so far) but broad risk-off move that has seen safe havens such as the Japanese Yen and Gold the biggest beneficiaries.
Gold hits highest level since April 2018
The largest market reaction to the Chinese data can be seen in Gold with the market jumping over 1% in response. The price of bullion has moved up to its highest level since April 2018 and at $1355/oz the market is only just over 1% from the 2016 peak. If the market can get up to $1390/oz then you have to go back to 2013 to find a higher price. The Chinese national stats bureau have since attempted to play down the significance of the poor data, but it's pretty obvious that their economy is slowing. Moreover, given the past lack of credibility associated with economic data from Beijing, the true figures could well actually be even worse.
Perfect storm brewing for Gold?
Perceived safe haven assets such as precious metals often thrive in periods of risk aversion and with US bond yields falling further it seems investors are becoming increasingly pessimistic about future growth prospects and at the same time expecting the US central bank to deliver a first rate cut in over a decade in the not too distant future.
The current economic climate could be seen as highly conducive for Gold bugs with a slowing economic growth and rising expectations of Fed rate cuts potentially providing a perfect storm for the precious metal.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.