Stock markets grow on China news and ahead of central banks' speakers.
So far, we have had some positive news in the market to start the last month of the third quarter with green numbers. China almost abolished the Corona restrictions, Australian GDP was better than estimated, and Manufacturing activities increased in Europe; despite higher inflation, German retail sales still keep alerts on.
Simultaneously with the removal of restrictions, early Wednesday, China's factory activity numbers also showed that they shrank less sharply than markets estimates in May. Caixin/Markit Manufacturing Purchasing Managers' Index rose to 48.1 in May, up from a 26-month low of 46.0 in April.
Before some positive news from China, the Australian GDP also showed a 3.3% increase in the first quarter. Moreover, with the market opening in Europe, better than expected May manufacturing PMI survey data for the Eurozone still emphasizes growth, even if it is slower than expectations. With the bloc's unemployment rate at 6.8%, growth expectations will be focused more on European Central Bank's meeting next week.
On the flip side, German retail sales slumped 5.4% on the monthly scale in April to confirm the adverse effects of increasing inflation.
Later today, we have to focus on ECB President Lagarde speaking. A few hours later, we must follow the St. Louis Federal Reserve President James Bullard and New York Fed President John Williams to have more clues on the central bank's possible decisions and outlook.
Overall data are not that disappointing, and US VIX also falls back under 27 to confirm this general optimism. However, as inflation expectations still are high and Bond Yields are growing, with the US 10-years bench market Treasury yields above 2.87%, the US dollar is also increasing.
Conclusion:
For now, the higher US dollar rates, increasing bond yields, and overall optimism in the stock markets put more pressure on the gold price. On the other hand, concerns and fears that inflation is or has not peaked, along with geopolitical risks, will keep gold demand strong. In conclusion, we can say that if the bulls do not have enough reasons and powers to go higher, bears also have the same situation. Therefore side movement for a while will be the most likely expectation. Look at the area between 1,790 and 1,860 US dollars.
