Gold Weekly Review: gold prices bottom recovery Economic decline now conduction effect the Federal Reserve may cut interest rates in the second half of the year

New York (Oct 5)  Earlier this week, stocks were buoyed by a strong dollar and hopes of progress in U. S.-China trade talks, hitting the attractiveness of gold, which hit a low of $1459 an ounce since Aug. 6.

But as a new wave of US economic data failed, the dollar index quickly fell, and gold recovered all its losses and rallied, hitting an intraday high of $1519.53 an ounce since Sept. 25, closing up 0.52 per cent to $1504.65 an ounce.

Earlier, US media quoted people familiar with the matter as saying that the Trump administration was discussing a variety of measures to limit the flow of US investment into Chinese companies. But a Treasury spokesman responded to one of the measures, saying the government had not considered banning Chinese companies from listing on the US stock exchange.

Against the backdrop of a trade dispute between China and the US, global economic indicators remain weak, pushing gold prices up more than 17 per cent so far this year. Investors will keep a close eye on the resumption of Sino-US trade talks next week.

The decline in American manufacturing spreads to the service industry

Us manufacturing in the world's largest economy continued to shrink in September and the index fell to its lowest level in more than a decade. Private job growth in the United States has been lower than expected, raising concerns about economic growth. Us economic data were disappointing, supporting safe-haven buying.

Bob Haberkorn, senior market strategist at RJO Futures, said: "the manufacturing data have fuelled expectations of a Fed rate cut and pushed up gold prices. The fact that manufacturing is shrinking shows that the United States is not isolated from the rest of the world. "

These concerns have been exacerbated by weak US services data. U. S. service sector growth slowed to its slowest level in three years in September, and employment growth in the service sector was the weakest in five years. Although US non-farm payrolls rose moderately in September and the unemployment rate fell to a 50-year low of 3.5 per cent, it has not been able to allay fears of sluggish economic growth, with the Fed expected to cut interest rates further this year.

The Fed may cut interest rates continuously in the second half of the year

The Fed is expected to cut interest rates by more than 75 per cent on October 30, up more than 25 percentage points from a week ago. The likelihood of a cumulative four rate cuts during the year has also risen sharply, with all policy meetings deciding to cut interest rates in the second half of the year.

Chicago Fed Chairman Evans said this week that a small monetary policy adjustment would not be enough to deal with potential shocks. Evans' remarks left room for the Fed to cut interest rates further if necessary.

"We will discuss at the next meeting what is appropriate," Evans said. "I am very open to making adjustments, as long as it is appropriate to do so." He also stressed that the recent contraction in US manufacturing is one of the downside risks to economic growth.

Kaplan, chairman of the Dallas Fed, said: "although the two interest rate cuts so far this year have reduced the possibility of a sharp decline in the economy, they have not eliminated it." If necessary, I would rather adjust the federal funds rate at a critical moment, and I think it should be earlier rather than later. "

David Meger, head of metals trading at High Ridge Futures, said: "We continue to see a series of weak economic data that have heightened concerns about economic growth. Against this background, we have seen a sharp rebound in demand for safe haven assets such as gold, which has rekindled the prospect of interest rate cuts at the end of October. "

Edward Moya, senior market analyst at OANDA, said in a note: "the Fed is expected to cut interest rates at least once more this year. The US economy will not fall off a cliff in the short term, and gold prices will inevitably repeat themselves, but the overall bullish trend should remain unchanged. "

European companies have weak profits and face trade woes

Amid a slowdown in the US economy and a stalemate in trade relations between the US and China, weak corporate earnings in Europe and signs of a full-blown trade conflict between the US and Europe have also heightened fears of a global recession.

Germany's leading economic institutions have slashed their growth forecasts for Europe's largest economy this year and next, blaming weaker global demand for manufactured goods and increased corporate uncertainty related to trade disputes.

ECB Vice President Jean-Doss said fiscal stimulus measures need to play a more important role in reviving the eurozone economy than in the past, but that the current spending framework is not sufficient to achieve the necessary boost.

The United States was approved by the WTO on Wednesday to impose tariffs on $7.5 billion worth of EU goods for illegal subsidies to Airbus. The move could trigger tit-for-tat transatlantic trade frictions and exacerbate trade concerns.

"it is clear that gold is being used as a hedge against volatility in other markets, investors have a negative view of global growth and trade prospects, and we are seeing capital inflows into safe haven assets," said Jeffrey Halley, an analyst at OANDA. "

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