Gold rises as Treasury yields fall on weakening US inflation

The US jobless claims rose to 239,000. This is the first increase in 3 weeks. Jobless claims in February fell to their lowest level since 2021, and labor force participation rose in March to its highest level in three years. This data indicates that the labor market is starting to weaken. The Producer Price Index, which shows the inflation rate between factories and factories, fell by 0.5% in the last month, indicating lower inflationary pressures in the US. Analysts believe the Federal Reserve may take a less aggressive stance on the monetary policy along with falling overall inflation. Minutes from the Fed’s March meeting showed that the Central Bank expects recent bank turmoil to trigger a “soft recession” later this year.

Today is the start of the US reporting season. JPMorgan Chase & Co (JPM), Citigroup Inc (C), and Wells Fargo & Company (WFC) will release quarterly results before trading opens.

Inflationary pressures in Germany are starting to ease. The latest data showed that consumer prices declined from 8.7% to 7.4% year-on-year. Today the inflation data will be released by France and Spain. And if there is also a decline there, the ECB may well lower the rate hike to 0.25%.

Oil prices lost some of their upward momentum after OPEC warned that a recession could hurt the oil market. In a report released on Thursday, OPEC noted the risks of lower summer oil demand amid production cuts announced this month by oil producers. The report also indicated that oil stocks look set to increase in the coming months and that global growth is facing a number of challenges.

Gold is approaching a record high. Yesterday’s session high was $2063.15, less than $16 below the historic high of nearly $2080 set by Comex Gold in August 2020. The rise in gold prices on Thursday came after the US producer price index fell to its highest in almost three years, reinforcing the notion that inflationary pressures are easing and markets expect an end to rate hikes.

Asian markets were also rising yesterday. Japan’s Nikkei 225 (JP225) gained 0.26%, China’s FTSE China A50 (CHA50) added 0.19%, Hong Kong’s Hang Seng (HK50) increased by 0.17%, India’s NIFTY 50 (IND50) gained 0.09%, Australia’s S&P/ASX 200 (AU200) closed negative 0.27%.

China’s exports unexpectedly rose by 14.8% y/y in March, a sharp deviation from market forecasts of a 7% contraction. This also contrasts with the downward export trend over the last five months. Imports fell slightly by 1.4% but still recorded a 15.3% year-on-year increase. The export jump pushes the trade balance up, supporting China’s GDP in the first quarter.

The Monetary Authority of Singapore (MAS) was the latest in a growing list of central banks to suspend future interest rate hikes. The move also came after data showed Singapore’s economy slowed more than expected in the first quarter of 2023.

Bank of Japan Governor Kazuo Ueda said he expects the global economy to recover from a period of slowdown, which will boost domestic wages, keeping the bank’s economic outlook optimistic. Investors will be focused on the first Bank of Japan policy meeting chaired by Ueda on 27-28 April, when the board will present fresh quarterly growth and inflation forecasts for fiscal 2025.