The price of gold and the SPDR Gold Trust (ETF) (NYSEARCA:GLD) were seen rising in European trade on Tuesday, a day after Japan reported disappointing GDP data. The unexpected drop in manufacturing measures as reported by the New York Federal Reserve also complicated the narrative about economic growth in the third-quarter. With that, investors are seeking cover under safe-haven assets such as gold.
The prices of gold futures for December delivery hit a session high of $1,356.55 a troy ounce in European morning trade. Gold gained 0.32% a day earlier.
Weak Japanese economic data
Japan reported that its economy expanded at an annualized rate of 0.2% in the second quarter, much slower than 2% growth that economists expected by a factor of 10. The disappointing GDP data doused investor hopes of a speedy economic recovery in the country amid ongoing fiscal and monetary easing measures.
The Bank of Japan has stepped up its purchase of bonds beyond its already record-breaking stint, while the company announced a massive spending plan as part of its economic stimulus package, something which has been tried before, many times.
“The Japanese GDP data came in below expectations. That could indicate a little bit more fiscal easing coming from Japan,” said Nitesh Shah of ETF Securities.
Downbeat U.S. data
Soft U.S. retail-sales figures and the surprise decline in manufacturing measures weighed heavily on the dollar, with the greenback ceding ground against a basket of foreign rivals.
The tepid U.S. economic data released recently have also pushed back expectations of a rate hike by the Federal Reserve before the end of this year. Though U.S. jobs data for July impressed as the country added 255,000 new jobs against the expected 179,000 jobs, productivity and retail-sales data have turned up weaker than expected.
The Fed hinted that its path to an interest rate hike would be guided by the quality of economic data being reported by various U.S. agencies. Investors are now keeping their eyes on inflation data due later today.