Gold futures rebounded Wednesday after another round of downbeat economic data and the inversion of the main measure of the U.S. Treasury yield curve, a phenomenon seen as a recession indicator.
Gold “remains shielded by various core market themes,” said Lukman Otunuga, senior research analyst at FXTM, in a daily note. “For as long as geopolitical tensions, Brexit uncertainty, global growth concerns and central banks easing monetary policy remain key themes, gold bulls are in control.”
The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -6.30% traded below the yield on the 2-year note TMUBMUSD02Y, -5.59%, marking an inversion of the most closely followed measure of the curve. The 3-month vs. 10-year measure of the curve has been inverted since earlier this year.
U.S. benchmark stock indexes extended losses after the curve inverted, while gold appeared to find a lift on haven-related buying. Gold had retreated Tuesday as stocks soared following the Trump administration’s decision to delay some tariffs on imports from China that had been scheduled to go into effect on Sept. 1.
“Sure, the yellow metal fell a few percent on the [tariff] announcement but it’s already back above $1,500 and looks relatively undeterred,” said Craig Erlam, senior market analyst at Oanda, in a note. “The central bank environment right now is clearly aiding this unwavering belief in the rally and perhaps this just isn’t viewed as the game changer for interest rates as it maybe is for the U.S. holiday period.”
Gold’s haven appeal was also reinvigorated by downbeat global data.
China said industrial output saw a 4.8% year-over-year rise in July, slowing from a 6.3% increase in June. Retail sales in China rose 7.6% year-over-year, decelerating from 9.8% in June and coming in below forecasts for 8.5% growth.
Data showed the eurozone economy slowed to a 0.2% growth rate in the second quarter, according to Eurostat, which also reported a 1.6% decline in industrial production. Germany, the eurozone’s largest economy, saw gross domestic product shrink by 0.1% in the second quarter from the previous three months as global trade tensions and a troubled automotive sector weighed.
September copper HGU19, -1.24% fell 3.3 cents, or 1.3%, to $2.597 a pound.
Read on Marketwatch