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US GDP and US-China Trade Tensions Support Gold Prices
US GDP and US-China Trade Tensions Support Gold Prices
Thursday, 07 September 2023

Price Performance Indicators

Product 

Price

% change

GOLDUD

1939.69

1.07%

GOLDGR

960700

0.80%

XAUUSD

1939

0.98%

COMEX

1939.8

1.14%

USD/IDR

15234

-0.33%

Gold focus :

  1. ICDX gold prices strengthened 1.07% in the week (28/08 - 01/09).
  2. US economic data and US - China trade relations.

Market Review

ICDX gold prices strengthened by 1.07% compared to the previous week, supported by a series of US economic data showing signs of economic weakened boost expectations that interest rates will remain stable at the next Fed meeting. The US Secretary of Commerce visit to Beijing to discuss a number of commercial issues have become focus considering that both are the world's two largest economies.

A number of weak US economic data showing slowing economic activity raised doubts over the possibility of higher interest rates. US Gross Domestic Product grew by 2.1% in the second quarter, weaker than the increase reported last month when it grew at a rate of 2.4%. From the employment sector, US job openings fell to the lowest level since May 2021 to 8.83M while June data was revised lower to 9.17M from 9.58M previously reported.

US Commerce Secretary Gina Raimondo discussed China's restrictions on gallium and germanium exports in discussions with Chinese Commerce Minister Wang Wentao during his visit to China. China, the world's largest germanium producer accounting for more than 60% of global supply, in July announced export restrictions on eight gallium products and six germanium products. China meanwhile criticized US efforts to block China's access to advanced semiconductors through export controls planned to be implemented in October. Raimondo announced that China had agreed to establish a new formal working group on commercial issues with the United States. Geopolitical and economic tensions generally increase the attractiveness of gold as a safe-haven asset.

Market View

September FOMC meeting

The next FOMC meeting scheduled to take place on September 19 - 20 will focus on further interest rate policy. The Fed's preferred measure of US inflation, the personal consumption expenditures (PCE) index, increased by 3.3% in July at an annual rate after rising 3.0% in the previous month. Bostic added that policymakers need to be careful and patient and let these restrictive policies continue to influence the economy to avoid the risk of tightening too much and causing unnecessary economic losses. Cleveland Fed President Loretta Mester said it would likely take one more increase in US interest rates to beat inflation although she did not want too tight a policy to risk an economic collapse. On the other hand, Federal Reserve Bank of Atlanta President Raphael Bostic said that monetary policy was tight enough to bring inflation back down to 2% in a "reasonable" period. Chicago Fed President Austan Goolsbee feels the focus will probably be on how long interest rates should be kept high, not on how high they should be raised. Higher interest rates have the potential to reduce the attractiveness of gold, and vice versa, gold will again be eyed if the Fed reduces its aggressiveness in implementing a tighter interest rate policy.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date

Data / Events

Actual

Expectation

Previous

4 - September

USD - Bank Holiday

-

-

-

5 - September

USD -  Factory Orders m/m

-2.1%

-2.5%

2.3%

6 - September

USD -  Trade Balance

-65.0B

-67.9B

-65.5B

6 - September

USD - ISM Services PMI

54.5

52.5

52.7

7 - September

USD -  Unemployment Claims

216K

232K

228K

7 - September

USD - FOMC Member Harker Speaks

-

-

-

7 - September

USD - FOMC Member Goolsbee Speaks

-

-

-

8 - September

USD - FOMC Member Williams Speaks

-

-

-

8 - September

USD - FOMC Member Bowman Speaks

-

-

-

8 - September

USD - FOMC Member Logan Speaks

-

-

-

8 - September

USD - FOMC Member Barr Speaks

-

-

-

Source: ICDX Research

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© Indonesia Commodity & Derivatives Exchange (ICDX)
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